Montreal, Canada

The “Feed the World” investment theme will eventually rank as one of the most powerful secular bull markets over the next 3 to 5 years.

Global inventories of foodstuffs and other important edibles are largely in a long-term decline as population growth exceeds total available food supplies. This situation will get much worse as falling water tables result in lower crop yields in the years ahead; investors should target this compelling theme now amid a deluge of negative sentiment in the peripheral soft commodities space.

Corrections always provide great buying opportunities. Since the first trading day of the month, most natural resource equities and commodities have been hit hard by silver’s collateral damage and the resultant bearish sentiment pervading in commodities. If everyone had hot pants in April, then most investors have seriously cooled in May.

Agricultural trading companies like Archer Daniels Midland (NYSE-ADM) and many others listed in Toronto, Singapore and Sidney have been slammed over the past three weeks. Most are now trading well below their 50-day and even 200-day moving averages. Also, resource currencies like the CAD and Aussie have also pulled back and in my opinion, are long-term buys at these lower levels because the Fed won’t be tightening for a long time.

One caveat, however, about going “whole hog” now on agriculture or anything for that matter:

The markets thus far have snubbed at the conclusion of QE II on June 30 when the Fed ceases its T-bond asset purchase program. I’ve got a bad feeling about the complacency pervading across markets recently as a major buyer of U.S. paper pulls out of the market in five weeks. Some sort of dislocation seems inevitable and for commodities, especially natural resource equities, the “risk-off” scenario won’t be good for stock prices.

I’d start nibbling now at companies like ADM and the grains complex in general (JJG). I also like some of the drillers at these lower levels and especially the large-cap gold miners like Barrick Gold (NYSE-ABX) and Kinross Gold (NYSE-KGC) – massacred this month.

Keep some powder dry. The end of QE II spells the end of major government support and financial market liquidity. There’s bound to be a deep sell-off, however short-lived.

Monday is Victoria Day in Canada. I’ll be back on Tuesday.