Despite being on the verge of the best first six months of a year in the past 35 years, there are some concerns we may see a reversal in commodities over the next six months. This would come as a result of higher oil, copper and other raw materials prices that could put pressure on consumer spending and lead to a growth in supply.

The negative effects have already started to become visible as gasoline demand has slipped in the U.S. due to high costs, while gold purchases in India saw a plunge of 50% year-over-year. "I've probably been positive for seven years and this is the first time I think there could be really a dramatic secular reversal, that it's not just a pullback" Michael Aronstein, president of Marketfield Asset Management in New York, stated.

The impact will not pass unobserved for airline companies, who will face a decline in the number of travelers over the Fourth of July holiday, following soaring jet-fuel expenses. Copper and gold demand are also facing weak levels after the price for copper reached $4.2605 a pound May 5, the highest ever, while the price for gold reached a record $1,033.90 an ounce March 17, and is expected to average $850 this year and $750 next year.

Shares of agricultural producer Monsanto (NYSE: MON) are trading in the red today, despite posting better than expected earnings per share for its fiscal third quarter. The main reason why the stock is trading lower is that it was unable to match the revenues that Wall Street was hoping to see.

Heading into today's earnings release, analysts had been hoping to see Monsanto show earnings of $1.34 per share, and the company was able to come in above this, with a reported $1.45 a share for the quarter. A fairly impressive EPS, and a very respectable 42% jump from the same period last year when it reported earnings of $1.02 a share to its investors.

The company stated that the main reason for the jump in earnings was strong sales for herbicides as well as specialty seeds. One of the company's most recognizable names in the herbicide market is Roundup, which it said had a great quarter.

Readers of this space know that my investment bias is toward large-cap companies with demonstrated business models that have a competitive advantage in established markets, preferably with a favorable global trend as a support. Moreover, there are few more-favorable global trends than food production, and with the above in mind, Agrium is worth a review.

Agrium (NYSE: AGU) is the No. 1 producer and seller of fertilizers in North America, including nitrogen, as well as potash and phosphate products.

The company has an 8-million-ton nutrient production capacity, but production is only half the equation: AGU also has more than 400 retail outlets in the U.S. and South America -- the back-end side of the revenue equation.

The top U.S. retailer of crop supplies, Agrium's products are also sold in Canada, Mexico, Brazil and Asia. Analysts really like AGU's plan to expand, and hopefully double, this $2 billion revenue stream within five years, stemming from emerging market demand. The Reuters F2008/F2009 EPS consensus estimates for AGU are $8.21/$9.53.

When natural disasters happen, there are always some companies that can turn the circumstances in their favor. Recent downpours in the Midwest provided such an opportunity as they came not only with high damages for people in the area, but also with floods for crop production, causing even higher agricultural commodity prices. The rise in corn and soybeans prices could easily lead to an increased demand for seeds, agricultural equipment, and fertilizers. BusinessWeek suggests some big names to invest in that could offer us the advantages we are looking for.

One such company is Archer Daniels Midland (NYSE: ADM), which could also benefit from higher ethanol prices, after purchasing seven businesses in 2007. Bunge Limited (NYSE: BG) is also amid possible winners, having forecast better-than-expected fertilizer earnings. Shell eggs producer Cal-Maine Foods (NASDAQ: CALM) is also on the selected list; the company saw its shares climb 15% year to date, and has just revealed a new dividend payout policy.

Another important name is Mosaic Co. (NYSE: MOS), whose stock prices have surged 70% so far this year. BusinessWeek cites Mosaic as being able to benefit from higher prices for fertilizer and potash. Following the same logic, the article points out potash provider Potash Corp. of Saskatchewan (NYSE: POT) and fertilizer distributor CF Industries Holdings (NYSE: CF), which should be able to take advantage of the weak dollar and higher sales prices.

At least drought is good for somebody, especially irrigation equipment manufacturer and installer Lindsay Corporation (NYSE: LNN). Lindsay's 3Q total revenues increased 54% to $143.6 million. And this is before the extensive flooding in the Midwest damaged so many irrigation systems that will require repair or replacement as soon as the waters recede. Net earnings also just about doubled to $14.1 million or $1.15 per diluted share. Lindsay boosted irrigation equipment domestic revenues 46% and international revenues a staggering 95%. Infrastructure revenues increased 30%. Operating income increased 50% and backlog of unshipped orders increased 53%. This is a company that literally cannot ship product out the door quickly enough to satisfy customer demand.

The story is the same for the first nine months of fiscal 2008. Total revenues increased 57% to $328 million. Irrigation revenues both domestic and international were up a total of 58% and infrastructure revenues rose 55%. CEO Rick Parod predicts that demand for comprehensive irrigation systems, including pump station controls and designs, will continue strong for the foreseeable future. Lindsay systems help farmers stabilize crop yield while also conserving water.

Given the good numbers right now and for the future, it is difficult to explain the recent plunge in share price. Currently the stock is trading at just under $100, down 18% in 2 days. The 52-week low is $34.84. The 52-week high is $131.14. Pickings for strong growth stocks are slim right now. This one would well repay some investor due diligence.

I'll alert Minyanville.com readers when Congressional hearings are scheduled to address this other form of speculation, which includes windfall losses.

As for the market, it would seem the largest institutions are equally hopeful -- for the sake of their relative performance -- that this simply can't be: According to some reports I've seen, they're roughly 500 basis points underweight energy.

I'd imagine both will continue to be long shaking heads.

Positions in Energy, Futures and Equities.

Corn rose to a record Monday on talk that heavy rain in the Midwest U.S. will cut supplies, Bloomberg News reported Monday. Corn for July delivery rose about 22.25 cents to $6.73 per bushel early Monday.

Prices also rose as traders sought corn as yet another hedge against inflation amid rising oil costs and a weak/falling U.S. dollar, Bloomberg News reported Monday. Demand for corn is also being bolstered by the use of the commodity as an ethanol source.

Oil fell $1.60 to $136.94 per barrel by midday Monday on profit taking, following its record two-day surge last week. Meanwhile, the dollar fell slightly against the euro and pound, to $1.5715 and $1.9756, respectively, but rose 1 yen to 106.03 versus Japan's yen.

The world is flat... for farming, too

Economist Glen Langan told BloggingStocks Monday those who find corn to be a curious inflation hedge are behind the curve.

The economic boom in emerging markets has driven up both the value of commodities and the food production process itself.

Moreover, the long-term trends look good, with out-sized gains likely to stretch for more than five years, if current emerging market economic growth trends continue.

That suggests the sector is likely to continue to attract new investors, and huge investment funds - - not a conventional source of capital for farming, historically - - have already started making bolder and longer-term food-related investments, by buying farmland, fertilizer, grain elevators, and shipping equipment, The New York Times reported Thursday.

One example: the BlackRock fund group plans to invest hundreds of millions of dollars in agriculture, chiefly farmland, from sub-Saharan Africa to the English countryside, The Times reported.

Farms: the new asset class-of-choice

Economist Glen Langan told BloggingStocks Thursday the investment fund / managed fund money flow in farmland and food is the logical next step for agriculture, given the large gains in global food demand projected for the next 5-8 years.

"The equity markets have not fully come to grips with the enormity of his increased demand, but investment funds are beginning to comprehend it, and the money flow toward farms has begun," Langan said. "Think about this - - China and India combined could add about 3-5 million members to the world's middle class each year over the next decade. Those are consumers with money to spend, and they'll consume more food. And that total does not include expanding middle classes in South America, Eastern Europe, and the Middle East."

Don't blame agricultural economists if they're feeling somewhat befuddled right now concerning wheat.

After two years of record price increases among grains -- including wheat -- and amid a global commodities price surge, and more than a month after predictions of wheat and bread shortages capable of producing social unrest, the U.S. Government is now predicting a global wheat production recovery for 2008.

U.S. wheat production to rise

The U.S. Department of Agriculture's latest estimate predicts that 2008 world wheat production will increase considerably, including an 8% increase in U.S. production to 656 million tons.

The USDA said good weather and record-high prices that have increased incentives to plant and farm effectively are the primary factors behind wheat's expected large harvest this year, Reuters reported Wednesday.

Wheat traded down 22 cents at $7.73 per bushel in Wednesday afternoon trading. Wheat has declined more than 20% since hitting a record-high $12.82 per bushel on March 12, 2008.

Analysts believe that Deere & Co. (NYSE: DE) has kept its hand on the plow. The general analyst consensus indicates solid expectations that the company will continue to perform at or above expectations. According to AOL Money and Finance, analysts are giving indications that Deere is a buy. In defiance of today's market pull back, Deere & Co. shares have gained one half percent as of this writing.

Media sources are openly optimistic about Deere & Co., though actual commentary is sorely lacking. Barron"s did go far enough to cite that some strategic execution failures of Deere competitors have played nicely for the company. With the weakened dollar giving solid momentum to Deere's international growth focus, and Deere equipment systems showing robust independent sales, for the time being the company appears to be a relatively safe harbor for longer term investment dollars.

Year to date return on Deere is just above a negative 3%, but the 5 year return on this company is over 300%. The best earnings estimates that I can lay a hand on hover around $1.75 per share.

Gary Sattler is a freelance blogger. He does not knowingly hold investment positions in the companies mentioned in this blog post.

Readers of this space know that my investment bias is toward large-cap companies with demonstrated business models that have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the aforementioned in mind, Caterpillar is worth a review.

Caterpillar (NYSE: CAT) is the world's No. 1 manufacturer in earth moving equipment and a leader in construction/agricultural equipment.

In general, analysts see CAT's 2008 revenue increasing 7-10% on strong international growth; North American revenue is expected to be flat.

Analysts also like the fact that Caterpillar is well-positioned to secure new business in emerging market economies for construction, infrastructure and land development work.

Meanwhile, raw material / core component costs are expected to continue to rise, limiting margin growth. The Reuters F2008/F2009 EPS consensus estimates for CAT are $6.02/$6.77.

TheStreet.com's Jim Cramer says the bull story here has more causes than just a weak greenback.

Better seeds and more fertilizer. That's it. Those are the technology weapons in the war against food shortages caused in the short term by a worldwide obsession with biofuels (we are the worst offender, of course) and in the long term by the increased affluence in China and India, which leads to more nutritious, protein-filled diets.

Both forces, when combined with worldwide droughts and failed harvests, not augmented by the U.S. -- we are late to start with our corn season -- are driving prices up to ridiculous levels. I have no doubt that if tomorrow the president of the United States said he was suspending the biofuel mandates for ethanol that we would see a collapse in food pricing. But I also have no doubt that this inept administration could never figure that out.

So, the solution comes to all of the stocks that were crushed yesterday: Monsanto (NYSE: MON) (Cramer's Take), Potash (NYSE: POT) (Cramer's Take), Mosaic (NYSE: MOS) (Cramer's Take) and Agrium (NYSE: AGU) (Cramer's Take). Without better seeds that produce higher yields, without more fertilizer that increases yields, we are going to be facing a long-term continuation of these price increases and the attendant inflation and food riots. Inflation, by the way, that has nothing to do with the Fed, unless the Fed is also a big granary hoarding wheat and corn.

The U.S. trade deficit unexpectedly widened in February 2008, the U.S. Commerce Department announced Thursday, as automobile and machinery imports offset record exports.

The February 2008 trade deficit increased to $62.3 billion - - its highest total since November 2007 - - and an increase over January 2008's revised total of $59.0 billion.

Economists surveyed by Bloomberg News had expected the February 2008 trade deficit to be $57.5 billion.

Excluding services, imports increased 3.5% to $180.2 billion, while exports rose 2.4% to $104.7 billion.

Exports shine

On the bright side, U.S. exports rose for the 12th consecutive month, representing one of the few solidly-performing dimensions of the otherwise anemic U.S. economy. Economists say the weaker U.S. dollar is assisting export sales, as it makes U.S. goods less expensive abroad. On Thursday, the dollar also fell to a record low $1.59 versus the euro.

Another bright point: the U.S. petroleum deficit decreased to $32.5 billion, its first decline in eight months. A decline in the quantity of oil imported offset a record oil price of $84.76 per barrel.

Readers of this space know that one of my preferred sectors is agriculture due to the boom in food consumption created by emerging market economic growth. Real incomes are rising in nations in Asia, Latin America and the Middle East, and with it, per capita food consumption is increasing, a trend that benefits Archer Daniels Midland.

Archer Daniels Midland (NYSE: ADM) is one of the world's largest processors of oilseeds, corn and wheat.

The frenzy that accompanied the financial world's realization that bio could represent a renewable energy form, for some energy users, appears to be tapering (thankfully). Still, although the bloom is off the biofuel rose, the key driver here remains in-place: commodities for food use. Demand for wheat, corn, soybean and other food basics is likely to remain strong through at least the end of 2009, propelled by the aforementioned emerging market growth.

Most analysts see accelerating earnings growth on strong corn and soybean demand, with pricing power. Further, given the vagaries of the energy business, it's worth underscoring that ADM is foremost a large, vertically-integrated food commodity company (wheat, corn, soybeans). The Reuters F2008/F2009 EPS consensus estimates for ADM are $2.84/$3.24.

The risks? Declining disposable income is expected to pressure U.S. consumer food budgets in 2008, and analysts expect a slowdown in U.S. revenue from food sources, something that will hurt ADM's domestic results, offset by a superior international performance.

The First Call mean rating for ADM is: Buy [10 firms]. Mean 2008 target: $48 [high: $60, low: $39].

Stock Analysis: Archer Daniels Midland is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from ADM's shares. I'd consider a Sell / Stop Loss at $31.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and which have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Deere & Co. (NYSE: DE) is worth an evaluation.

Deere, one of the two largest manufacturers of farm equipment in world and a leader in construction and lawn care equipment, is well-positioned to take advantage of several, long-term, global trends. Chief among these are strong international agricultural and international construction/building activity and an expanding international market for consumer equipment sales.

Solid, enduring growth in international agricultural markets is the standout fundamental here, with the segment's revenue growth expected to offset slumps in equipment sales for the cooling U.S. housing market. Other positives: DE's costs remain under control, its balance sheet is strong, and agriculture equipment market conditions suggest the company has modest pricing power. Further, increased use of renewable fuels is likely to add to demand for DE's equipment, assuming at least one renewable fuel gains traction as a practical, affordable alternative to petroleum-based energy.