By DAVE KANSAS
Washington -- and just about everyone else -- is in a tizzy over the debt ceiling. Ratings firms are threatening to cut the U.S.'s top-notch AAA rating, politicians are scrambling for some sort of solution, and the markets are volatile.
The fiscal issues and the associated political dysfunction are definitely important. But they aren't everything. With such a huge amount of attention focused on windy budgetary debates, now might be a good time to focus on things that will matter regardless of what happens on the Potomac. Or anywhere else for that matter. With U.S. growth limping along, fiscal challenges raging in Europe and wars flickering from North Africa to the Middle East, the menu of troubles has grown in recent weeks.
At times like this, food and energy state to look more enticing. People need to eat, and the global economy needs lots of the black stuff to keep humming. And demand for both seems likely to keep on rising.
Crop prices have been on the rise over the past few years, and oil, while down from its highs earlier this year, is expected to become quite dear as we roll into 2012. Both commodities are facing concerns about current and future supplies as demand inexorably rises.
United Nations food officials acknowledge that elevated crop prices are likely to persist for some time. Farm income has risen so high that farmers are no longer qualifying for federal subsidy payments, according to The Wall Street Journal. The story added: "A fundamental upward shift in crop prices is creating the real possibility that farmers won't ever again qualify for the primary form of farm subsidy."
On the oil side of the ledger, Goldman Sachs forecast in late May that prices will rise this year and that supply constraints will trigger sharply higher prices in 2012. In early July, it reiterated that forecast, saying: "In our view, it is only a matter of time before inventories and OPEC spare capacity become effectively exhausted, requiring higher oil prices to restrain demand, keeping it in line with available supply." The firm's 12-month price target for West Texas Intermediate crude is $126 a barrel, well above the current price of about $97.
There are several ways to invest in the food and energy story. On the food side, opportunities include equipment, seeds and fertilizer. A number of these stocks (like much of the market) have trended lower during the fiscal follies in Washington.
Deere & Co. (DE),
On the seed front, Monsanto (MON)
Fertilizer companies such as Potash Corp. of Saskatchewan (POT),
Not everything is grand in the agriculture sector. Corn Products International (CPO)
Among energy companies, the "fertilizer" companies are the ones that hunt for oil and help in its extraction. Among the leaders in this group are Schlumberger (SLB),
Baker Hughes (BH)
Among bigger oil companies, giants like Exxon Mobil (XOM)
Another option might be Hess (HES)
DaveKansas blogs at The Wall Street Journal's MarketBeat. Email: email@example.com