The agribusiness sector, measured by the Market Vectors Agribusiness ETF (MOO), posted a bumper crop or return in 2009, up nearly 60% or nearly 80% from the March 2009 lows.

We are strong supporters of Agriculture as an undervalued investment theme within the current 'Generational Opportunity'. We currently hold positions in Deere (DE), AGCO (AGCO) and Market Vectors Agribusiness ETF in our model Beacon Master Portfolio.

One area that has been left behind in the current commodity rally are the agricultural softs, or the grains in particular. The chart below shows the relative of the Rogers International Commodity Agriculture ETN (RJA) versus the S&P Global 100 Index ETF (IOO). We can see a sharp underperformance from March to October 2009 against the S&P Global Index. Since then the Rogers fund has been base building and we believe will to return to the top of its two year trading range over the next 12 months. This would result in a 46% out performance.

Agricultural Commodity ETFs and ETNs

Unleveraged Mixed Agricultural Commodity ETFs and ETNs

• E-TRACS UBS Bloomberg CMCI Agriculture Index ETN (UAG)
• E-TRACS UBS Bloomberg CMCI Food Index ETN (FUD)
• iPath Dow Jones-AIG Agriculture Subindex Total Return ETN (JJA)
• iPath Dow Jones-AIG Grains Subindex Total Return ETN (JJG)
• iPath Dow Jones-AIG Livestock Subindex Total Return ETN (COW)
• iPath Dow Jones-UBS Softs [coffee, cotton and sugar] Subindex Total Return ETN (JJS)
• MLCX Biofuels Index ELEMENTS ETF (FUE)
• MLCX Grains Index ELEMENTS ETF (GRU)
• PowerShares DB Agriculture Fund ETF (DBA)
• Rogers International Commodity Index – Agriculture ELEMENTS ETN (RJA)

As we enter the era of world inflation courtesy of major central banks de-basing their currencies like no tomorrow (the FED and ECB being the worst of the two, though the latter stands on much stronger economic footing), it is imperative one's portfolio be comprised of those equities which will outpace or at least keep up with inflation. This is most efficiently done in my opinion by being overweight commodity equities as well as international consumer durables, some technology and infrastructure. I am particularly fond of those commodities that serve as inflationary hedges and those with supply-demand disconnects.

1) Silver Wheaton (SLW) - I have talked multiple times about this extremely dynamic business model and the transformational year 2009 has been for the future of this company. Management continues to execute deals and acquire a diversified group of royalty streams at bargain basement prices. Not only will they be the lowest cost producer (under $4.00/oz) but they will also become one of the world's largest producers (peak production of 50m oz per annum assuming 2 development projects come online within the next 5 years or another acquisition which they have made crystal clear in the most recent conference call). This is the best inflationary hedge in my opinion as they pay no income tax (has made arrangements with the Canadian government to either reinvest all excess profits or pay them out as dividends). That being said in one or two more years, these royalty streams will sell for a much bigger premium relative to today. This means a payout ratio of 75-85% will likely be in place by 2015 or so.