Barring strict trade limitations, American poultry producers are in position to expand on the record exports to China.

And they’re doing it by sending our poultry-refuse to the People’s Republic. That’s a fact that could lead a select few investors to [even more] serious back-door gains, but more on that in a minute…

Chicken paws are big business now, but it is too close to dinner for that story. Exports to China through Hong Kong have developed a market for a product that had little use except for animal feed or fertilizer. This is the beginning of a phenomenon like here in America for chicken wings, which came from unused parts. That’s a story that you’re not hearing in the mainstream financial news.

Not only is this the second wave, or updated version, of Chinese demand, but we’re now looking at a feed-conversion ratio that separates chicken farmers from unprofitability. The benchmark of two pounds of feed for every one pound of bird is mandatory in order to even think about staying in the black.

Chickens consume a diet of two-thirds corn and one-third soy meal as they approach harvest. In the long run, hedging allows producers to fix their costs of doing business.

But in the short-run, farmers can get into trouble by hedging.

Sometimes, farmers focus on the short-term movements and need to be reminded of the market function of gains or losses in the commodities markets to offset gains or losses in the cash markets. They can tend to speculate and not truly hedge to protect their bottom lines.

Some of you may be wondering if there is a tradable Chicken contract… That is, if there’s a way to directly invest in China’s poultry boom.

Well, a “broiler chicken contract” never caught on as a trading vehicle, because of a number of factors. One is the lower volatility of whole chicken prices and another is the vertical integration of that business that doesn’t need price certainty as much as beef and pork. These guys own the chicken from egg to plate – constant trading just isn’t necessary.

But don’t think I haven’t found a way to profit nonetheless…

Your Back-Door Route to Chicken-Fueled Profits

Along with worldwide chicken fundamentals, another big theme that I let my Resource Trader Alert readers in on is the expanding role of ethanol. From 1991-2006, chicken costs were down, resulting in lower and lower real prices for consumers. Ethanol production has changed the commodity dynamics and is why the numerous analysts I have spoken to are convinced $4.00 a bushel corn is right around the corner.

My readers are already positioned to profit from that – and I’m expecting a turnaround soon.

Right now, over 35 ethanol plants sit idle, with potential to produce 2.2 billion gallons. This new variable has quadrupled the volatility in feed costs. Volatility means price changes, and it is our job to sort out the directions of these big movements.

Look for new relative highs in the stock markets this week and for follow-through buying to continue these bullish trends. The risks versus rewards are in our favor for all of our positions with the weak dollar and constructive demand factors.

The markets are moving fast, and the slow movers are missing out on some of the biggest trades – like the play I sent my Resource Trader Alert readers on Monday.

And the sugar trade my readers closed out yesterday for 107% gains…

To learn more, visit the Resource Trader Alert website…
It ALL comes back to commodities,

Alan Knuckman

Commodity expert Alan Knuckman hails from the home of commodity trading in Chicago, where he began working as a clerk on the floor of the Chicago Board of Trade (CBOT).  Alan’s worked with all aspects of the commodity markets for the past 18 years - and now he brings his inside knowledge on energies, grains and gold to you. Alan's expertise and authority has led to frequent appearances in mainstream media, such as MarketWatch, Bloomberg, Fox Business,  CNN Money, and Reuters. He has also made multiple appearances on CNBC and CNBC Europe programs. Alan is currently the editor of Resource Trader Alert, a trading service devoted to raking in profits from hard commodities.

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