Below please find Jeremy Grantham of GMO Capital and his always enjoyable quarterly letter. In the Q1 2011 letter he discusses his view on commodities and the capital markets. One particular idea that was rather interesting:
"Until about 1800, our species had no safety margin and lived, like other animals, up to the limit of the food supply, ebbing and flowing in population. From about 1800 on the use of hydrocarbons allowed for an explosion in energy use, in food supply, and, through the creation of surpluses, a dramatic increase in wealth and scientific progress. Since 1800, the population has surged from 800 million to 7 billion, on its way to an estimated 8 billion, at minimum. The rise in population, the ten-fold increase in wealth in developed countries, and the current explosive growth in developing countries have eaten rapidly into our finite resources of hydrocarbons and metals, fertilizer, available land, and water. Now, despite a massive increase in fertilizer use, the growth in crop yields per acre has declined from 3.5% in the 1960s to 1.2% today. There is little productive new land to bring on and, as people get richer, they eat more grain-intensive meat. Because the population continues to grow at over 1%, there is little safety margin. The problems of compounding growth in the face of finite resources are not easily understood by optimistic, short-term-oriented, and relatively innumerate humans (especially the political variety)."
That does a great job explaining why the long-term trend for agriculture and related assets is very bullish over the near term. I am particularly interested in CVR Partners (UAN) which is a nitrogen fertilizer facility that is structured as an MLP. Haven't dug deep yet but it has decent potential.
Without further delay. Enjoy:
GMO - 4-25-11