Declines in agriculture-related stocks, like Monsanto, were hardly surprising, as they came just days after they hit fresh 52-week highs. But how often do you find stocks that fall like this for no real reason? Some say it may have something to do with a kneecapped Market Vectors Global Agribusiness ETF (with the cute MOO symbol), which gained closed to 50% on the heels of rising ethanol demand.
Unfortunately, the latest dismal business report from the Philadelphia Fed is what may have killed off the run. At the same time that the 10 a.m. Fed report reportedly dipped to levels not seen since October 2001, said MOO ETF began its descent, according to reports. The thinking may be that weak manufacturing activity translates to weaker oil demand, which could lead to less ethanol demand.
And down comes the agriculture business, cradle and all.
But consider using the sell-off, amid the Dow’s 1,600-point drop, as a buying opportunity. Companies like Monsanto still believe the future is bright with regards to its genetically engineered crops business, the same business Origin Agritech (SEED) is part of. Monsanto, for instance, believes that growing acceptance of genetically engineered crops is expected “to deliver new business opportunities in coming decades.”
According to Chief Technology Officer Fraley, “It’s still like being back in the ’60s with computers. This is an industry that is very much in the beginning of its cycle."
We’d use the sell-off to load up on stocks like Monsanto (MON:NYSE) and Origin Agritech (SEED:NASDAQ).