Cramer: Russian Wheat-Export Ban Means Ag Bull Market
In response to a drought that's destroyed much of Russia's crops, its government banned grain exports Thursday and as a result, wheat prices climbed by 7% to hit a new high.
Welcome to the agriculture bull market, Cramer said Thursday.
"What we're seeing here is a turbo-charged ag bull market based on soaring demand from emerging markets creating a potentially massive worldwide food shortage," Cramer noted, adding that there is also increased demand in both China and Canada.
Before the export ban, fertilizer giant Potash predicted that Russia's grain production would decline by 20% while Canadian production would fall by 23%. In China, food self-sufficiency is a major priority for the government, but Cramer said it will import over 75% of its soybean requirement nonetheless. Cramer noted that the People's Republic will import roughly 1 million tons of soybeans a week, as well as significant volumes of corn for the first time since 1996. Meanwhile, the Mad Money host said India could reach record ag import buying by the end of the year.
With increased demand, farmers will have to get more out of every acre of land, Cramer said. That means fertilizer companies will likely profit. On July 29, Potash reported a strong quarter of $1.38 in earnings per share for a 19 cent beat. Cramer also recommends Bunge , a White Plains, N.Y.-based dealer in fertilizer, among other farm products. Investors could also look to Deere , which Cramer thinks is a good way to play ethanol, in addition to the increased demand for more crops-per-acre.
More conservative investors should check out DuPont, which deals in a variety of businesses and agriculture is one of them. The company boasts a 3.9% dividend yield and has a history of paying a dividend for more than a century, Cramer noted. Investors could also look to Monsanto , which Cramer said is "a stock he's disliked for a long time." In July, he got behind the stock at $57.61 a share because the estimates had come down so low, he thought the company could beat them. Monsanto confirmed its strength again when it raised its dividend by 3 cents Wednesday.
"I think the agriculture bull market is here to stay," Cramer said. "You need to get a piece of it."
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