Investing in Agriculture Stocks: Sunspot Activity Declines Creating Opportunty

A few months ago we had the opportunity to sit down with Sprott Asset Management’s John Embry.

We talked about gold, silver, oil, uranium and all other sorts of assets investors should be looking into.

Despite the good prospects for all those, Embry and your editor both agreed the best opportunity was probably in agriculture. Embry brought up specifically the impact of solar activity, a.k.a. sunspots, on crop production.

Although it’s impossible to see over year to year, the sunspot activity is in sharp decline.

Physics World reports, The Sun Could Be Headed into a Period of Extended Calm:

Researchers in the US may have discovered further evidence that the Sun is heading towards an extended period of quiet activity, the like of which has not been seen since the 17th century. The impact this may have on climate is poorly understood but it would be good news for satellite communications, which would continue to avoid the harsher impacts of space weather.

Scientists have long known that the Sun's magnetic activity varies over a cycle of approximately 11 years. Greater magnetic activity leads to more "sunspots", or darker patches visible on the solar surface. These sunspots are regions where the magnetic field lines have become twisted due to differential rotation in the outer layers of the Sun.
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We were expecting to reach the next solar maxima around 2011–2012. However, space weather experts have been surprised over the past few years to report very few signs that the number of sunspots has been picking up since the last solar minimum in 2006. This has prompted some space scientists to forecast that we are heading towards another prolonged spell of quiet sunspot activity, the last of which was observed between 1645 and 1715 in a period called the “Maunder Minimum”.

This could, and more likely will, have a tremendous impact on curtailing agriculture production. All this is happening at a time when demand is continuing to rise.

Cosmos Magazine lays it all out in The Coming Famine:

Pandemics and cosmic accidents, there will be about 9.1 billion people living in the world in 2050. Yet they will eat as much food as 13 billion people at today's nutritional levels. So how will we feed them all?
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The problem is that humanity is consuming more food, year-on-year, than it produces, especially as demand for high-protein food increases in high population developing countries like China and India.

The world is also moving towards a water crisis: cities are now taking up to half of the water that was once used to grow food, while groundwater levels are declining in every country where it is used for food production. The International Food Policy Research Institute (IFPRI) in the U.S. suggests that by 2025 water scarcity may inflict an annual loss of 350 million tonnes of food – roughly equivalent to losing today's global rice harvest or the entire U.S. grain crop.

We're also losing land; we are building on it, eroding and degrading it, or locking it in conservation reserves. Whatever the cause, the total available area of arable land is now falling. Compounding this, we are losing nutrients in the land we do have.

The United Nations Food and Agriculture Organisation notes that we apply about 150 million tonnes of elemental fertiliser to our farms every year; however the U.S. Department of Agriculture points out that we lose six times that amount – an estimated 1.1 billion tonnes of nutrients – through soil erosion and leaching.

It’s the perfect storm for agriculture. I expect it to take a year or two to really start playing out, but I still believe agriculture investments will be one of the best places to have your money in the next decade.

It’s simple supply and demand. Supply is going to decline and demand is going to rise. Agriculture prices will rise and successful investors looking for the best investment ideas will get in now.

We continue to wait for any correction in the markets to load up on agriculture stocks. Agriculture stocks are going to be one of the best spots to have your money in the next 10 years and we’ll be covering them all across Q1 Publishing’s investment newsletters.