Before the Bell: The Ag Trade; Greenspan Glum

Morning Perspective: The Ag Trade According to The WSJ, farmers are living in the “golden age” of agriculture, with grain prices surging to historic levels. Prices of corn, wheat, and soybeans are all trading 25% or more above their levels a year ago, due in part to increased demand from biofuel producers and the soaring demand from the emerging markets such as China and India. Further, economists expect net farm income to grow to $92.3 bln in the next year – a 51% increase over the 10-year average of $61.1 billion. Professor Ryan Krueger mentioned this long-term secular story back in November in The Ag-Trade.

From the Bull Pen:

Bulls can play the upside in Monsanto (MON) with near-term sell-stops below $110. Another alternative is Deere & Co. (DE). Bulls believe the company will benefit with the increase in farming income. Sell-stops may be set below $81.50. From the Bear Cave: Bears know these high prices are pressuring the margins of companies like Kellogg (K). Buy-stops may be set above $52.50 on downside attempts. Greenspan Glum According to Bloomberg, Former Fed Chairman Alan Greenspan said the U.S. economy is on brink of a recession. At a conference with energy executives, Greenspan said the U.S. is “clearly on the edge” with chances being “50% or better.” The statement is a stark contrast to his view a year ago when he said there was only a 33.3% chance the U.S. would enter a recession. Further, current Fed Chairman Ben Bernanke testified before Congress yesterday that downside risks to growth had increased with the job market and high energy costs taking a toll in spending.

For context, read Mr. Practical’s Minyan Mailbag: Fed’s Fix. From the Bull Pen: Bulls can look to Molson Coors (TAP) in a slowing environment. Near-term sell-stops may be set below $48. From the Bear Cave: Bears see a short play in Caterpillar (CAT). Buy-stops may be set above $72 (above the double top) or $75 for those with a higher risk profile.