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Commodities

Commodities

The Best Ways to Profit from Food Inflation

Though tame through most of last year, food inflation has begun to surge again in 2013 – just as Money Morning Global Resources Specialist Peter Krauth predicted it would.

"Food inflation hasn't reared its head for some time, and I think it's about to start making headlines again before long," Krauth wrote in a Jan. 18 note to subscribers of his Real Asset Returns investment service.

Sure enough, an inflation report yesterday (Wednesday) from the Labor Department showed that the biggest increase in January prices came in the food category.

Food prices – for both groceries and food eaten at restaurants – rose 0.7% in January, compared with December, accounting for more than three-fourths of the increase in the Producer Price Index (PPI).

The biggest driver of food inflation in January was the cost of vegetables, which rocketed 39%, withbroccoli, cauliflower and lettuce increasing the most.

The U.S. Department of Agriculture's Economic Research Service is projecting food prices in 2013 will increase 3% to 4%, an annual increase the agency says is above the historical average.

The ERS said it expects animal-based food products (mostly meats) to be hit hardest, with cereals and bakery products also seeing above-average price increases.

The return of food inflation to the U.S. should come as no surprise, as it has become a worldwide trend over the past decade.

The Food Price Index developed by Food and Agriculture Organization of the United Nations has more than doubled from 97.7 in 2003 to 209.8 now following a decade of stability. (The index stood at about 102 in 1993.)

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Commodities

Investing in Farmland: Is a Bubble Brewing?

It's little wonder that yield-starved pension funds and other investors are investing in farmland.

That's because farmland, a hard asset, produces high returns and, unlike other hard assets such as precious metals, provides investors annual income from crop sales.

The National Council of Real Estate Investment Fiduciaries (NCREIF) compiles data on the total returns (income and capital gains) on farmland purchased for investment purchases, primarily by pension funds looking for income and diversification.

In 2012, the annualized total return on investment farmland was 18.58%.

The NCREIF has data going back to 1992. Since then, the highest annualized total return was 33.90% in 2005 while the lowest annualized total return was 2.02% in 2001. Over the 20-year period from 1992 to 2012, the average annual total return was 11.83%.

And sharply higher prices for major agricultural commodities such as corn, wheat and soybeans have increased annual investment income for anyone investing in farmland.

Legendary hedge fund manager Jim Rogers has been buying farmland in Australia for a private fund.

"It's the farmers, the producers, who are going to be in the captain's seat when the prices go through the roof," he told The Australian Financial Review back in 2011.

"The world has got a serious food problem," Rogers told Time magazine. "The only real way to solve it is to draw more people back to agriculture."

But is this rush toward investing in farmland now creating a huge bubble?

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Commodities

Why Uranium Prices Are at a Critical Tipping Point

Despite the Fukushima disaster in March 2011, the demand for nuclear power continues to rise.

For uranium investors, that means the commodity is at a critical tipping point towards much higher prices.

Thanks to considerably higher energy costs, even Japan is now shifting its stance on nuclear power. According to Japan Today, newly elected Prime Minister Shinzo Abe now says he is willing to build new nuclear reactors.

That's a dramatic shift from the previous government's pledge to phase out all of the country's 50 working reactors by 2040.

But the most significant impact in nuclear power is likely to come from the developing world-especially China.

China's commitment to nuclear power means they could be adding as many as 100 nuclear reactors over the next two decades. That's a monumental shift considering China currently operates only 15 reactors.

Other nations such as Russia, India, South Korea, and the UAE are contemplating new nuclear power plants as well that would add to the 435 nuclear reactors already providing base-load power worldwide.

In this year alone, 65 nuclear power plants are under construction, another 160 new reactors are currently in the planning stages and 340 more have been proposed.

Given this ongoing shift, the demand for uranium is clearly going to be getting stronger, which presents a problem since there is already a uranium supply deficit.

According to the World Nuclear Association, total consumption of uranium was 176.7 million pounds in 2011 and growing. Meanwhile, last year's total uranium output was 135 million pounds. That's an annual deficit of roughly 40 million pounds.

Of course, you know what happens when supply can't keep pace with demand— uranium prices will begin to rise.

But that's only part of the story. Thanks to the end of a program called Megatons to Megawatts the supply deficit promises to get even worse.

Currencies

Is the Japanese Yen Headed for a Long Decline?

The Japanese yen has already fallen by more than 12% against the U.S. dollar since Nov. 1, 2012 – and it could still have further to fall.

That's mainly because the Bank of Japan appears likely to go along with the wishes of the Liberal Democratic Party, led by newly elected Prime Minister Shinzo Abe, and step up its attempts to eliminate deflation by using "unlimited easing" and setting a 2% inflation target.

Most of the Japanese yen's weakness we have seen so far stems from aggressive jawboning by Prime Minister Abe and other LDP leaders. And outgoing Bank of Japan Governor Masaaki Shirakawa has appeared likely to go along with Prime Minister Abe's demands for closer cooperation between the government and the central bank.

The Bank of Japan's Monetary Policy Committee (the Japanese equivalent of the Fed's Federal Open Market Committee) is in the middle of a regularly scheduled two-day meeting. It is widely anticipated that the BOJ will agree to additional easing measures – most likely purchases of Japanese government bonds (JGBs) – and will formally adopt the government's 2% inflation target.

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How to Find the Best Dividend-Paying Stocks for You

If you find yourself always on the hunt for the best dividend-paying stocks for your portfolio, that's because one of the most discussed topics in the past two years has been the search for the right income investments.

We all know the story and the problem.

The U.S. Federal Reserve has lowered interest rates to basically zero and has made it clear it intends to keep them there for years. The hope is that this eventually spurs the economy and returns us to a state of economic growth.

While we don't know how the Fed's efforts will succeed given two more years, we do know that it has created near impossible conditions for investors in search of income.

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Gold Prices Will Soar Past $2,500 As Central Banks Buy it Up

With governments all over the planet buying up gold over the past five years, it's no wonder gold prices have risen 142% since 2008.

Central banks bought 254.2 tons in the first half of 2012 and may add close to 500 tons for all of 2012, the World Gold Council said last month.

According to the International Monetary Fund (IMF), Russia added 18.6 metric tons of gold in July. South Korea bought 16 tons — a 30% increase. Kazakhstan increased their bullion reserves for a 12th consecutive month.

Turkey, Ukraine and the Kyrgyz Republic also joined the party.

And the buying continued in August, albeit at a more moderate pace, the IMF confirmed.

"Gold prices continue to be underpinned by growing demand from central banks…we believe this trend is likely to ramp up once liquidity increases in global markets," Justin Harper, markets strategist at IG Markets, told MarketWatch.

That means the cheap money policies by many of these same central banks, such as the Federal Reserve's recently announced QE3 program, will also help fuel the rise in gold prices.

Combine that with skyrocketing demand from the private sector, and government hoarding could easily push the price of bullion as high as $2,500 in 2013.

In fact, the rally could be similar to gold's big breakout move in 2007, when gold prices surged 60%, according to Citi FX Pro analyst Tom Fitzpatrick.

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Investing in Gold ETFs: Don't Miss this Bull Market

The gold bull market is alive and well, meaning now's the time for investing in gold exchange-traded funds (ETFs).

Gold kicked off the week with December futures rising $6.80 (0.4%) to $1,738.60 an ounce Monday. This came on the heels of Friday's disappointing U.S. jobs report and the anticipation of a newsworthy week for the precious metal thanks to some possible central bank action.

Gold futures again edged higher today (Tuesday) with December futures at $1,736 an ounce. The gold price rise continues thanks to an increasing euro and the anticipation of a German court ruling Wednesday on the Eurozone bailout fund's legality.

Adding to the bullish sentiment on gold is the anticipation of this week's two-day Federal Open Market Committee (FOMC) meeting: Will they or won't they announce another round of additional easing on Thursday?

While these events help price outlook for gold, they're also drawing investors to gold ETFs.

On Monday, gold ETFs rose to a record high of 72.49 million ounces, reported Reuters.

In 2012, total holdings have increased by almost 3.5 million ounces; in the last month 2.7 million ounces flowed into gold ETFs.

The interest in investing in gold ETFs is another bullish signal for the yellow metal, erasing some worries over the sustainability of gold's price rise.

"With a good portion of gold's recent strength accounted for by the sharp increase in spec positioning, this certainly raises concerns on the longevity of the [gold price] move, especially with fundamental buying virtually out of the picture," Edel Tully, a strategist at UBS, said to Reuters. "But the fact that the (ETF) camp – a relatively less-fickle group of buyers – has also been giving gold its vote of confidence offsets some of those worries."

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Profit from Rising Silver Prices with These Three Picks

Silver prices rose Friday after the August U.S. jobs report release, inching toward $34 an ounce.

The gain followed silver's rise to a five-month high during trading Thursday.

Silver is the best performer for precious metals with its 16% increase in 2012, reported Reuters. This compares to gold's 8% percent rise.

For silver and gold, recent price increases have come from greater expectations for additional monetary easing from the European Central Bank and the U.S. Federal Reserve. On Thursday, the ECB added some fodder for this with its "outright monetary transaction" (OMT) program.

Next up for additional rising could come from the Federal Open Market Committee (FOMC) meeting next week. Look for a statement on Sept. 13 whether or not there will be plans for QE3.

With QE2 in 2011, silver rose to almost $50 an ounce.

Investment demand should also increase for the metal thanks to the effect of global monetary easing.

Brad Cooke, chairman and chief executive of Endeavour Silver Corp.said to MarketWatch that it will "take off again as we see more monetary inflation/economic stimulus programs by governments in America, Europe and China."

He sees silver hitting the $40 mark within the next months before it falls off again.

But for silver, there's more than just monetary easing affecting its prices.

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Paul Mladjenovic, author of "Precious Metals Investing for Dummies," said to MarketWatch that "Oversized short positions in the silver futures, continued industrial demand in Asia, investment demand in the U.S. and the new applications for silver in areas such as solar power, [radio-frequency identification] technology and other new developments" are all a net positive for silver's price outlook."

He expects silver prices to "zigzag upward toward $100" an ounce by 2014.

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Why the U.S. Drought is Hitting Harder Than Most People Realize

This is an important update on the U.S. drought of 2012 and its impact on food prices, water availability, energy, and even U.S. GDP.

Even though the mainstream media seems to have lost some interest in the drought, all of us should continue to be aware of it since its ramifications are far-reaching.

As we discussed in this report, it's all connected to a larger pattern of exponential growth that is simply no longer sustainable. At stake is nothing less than the traditional American way of life.

This monumental drought has already led to sharply higher grain prices, increased gasoline costs (via the pass-through of higher ethanol costs), impeded oil and gas drilling activity in some areas (due to a lack of water), caused the shutdown of a few operating electricity plants, temporarily reduced red meat prices (but will also make them climb sharply later) as cattle are dumped in response to feed- and pasture-management concerns, and blocked and/or reduced shipping on the Mississippi River.

All this and there's also a strong chance that today's drought will negatively impact next year's Winter wheat harvest, unless a lot of rain starts falling soon.Hurricane Isaac certainly helped, but didn't go far enough.

Further, there will be a definite impact to U.S. GDP, which could add to pressures (excuses?) that the Fed may use to justify additional quantitative easing (QE) measures (otherwise known as 'printing more money').

Here's an in-depth look at why the U.S. Drought of 2012 is far from over…

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Investing in Silver: Double Down on the White Metal's Gains

Gold remains the favorite of precious metals investors, but silver is now a strong number two…with a bullet.

That means you should consider investing in silver now before it goes even higher.

In case you haven't noticed, after wallowing around in the mid-20s for months, silver prices have shot back over $30 an ounce.

And thanks to wildly bullish technical and fundamental indicators, silver could soon retest its 2011 high, or even blow through it.

If that happens, silver's run-up will hand investors a fortune, so here's how you can cash in.

Turnaround in Silver/Gold Ratio

Historically, the price of silver per ounce has usually been equal to around 1/16th of an ounce of gold,meaning it took 16 ounces of silver to equal the value of a single ounce of gold.

But over the past decade, gold has taken off, trading as high as 60-70 times the price of silver.

That is, until last year. As silver prices rose to nearly $50 an ounce, the ratio fell to 30-1.

But as prices for the white metal settled near $27, the ratio has skyrocketed back up.

Right now, you get 55 times more silver for your money than gold.

But it would still have to triple in price to even sniff where it should be in relation to gold.
And there are signs that this is just what's going to happen.

Strong Signals for Silver Price Rally

From a technical viewpoint, the rally in silver may be just beginning.

You see, the silver futures markets are in what's known as "backwardization."

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