Acquire J.C. Penney (JCP) Puts Says Morgan Stanley (MS)

Morgan Stanley (NYSE:MS) recommends that traders acquire puts on J.C. Penney (NYSE:JCP), citing higher costs and the inability of the retailer to raise prices.

Christopher Metli and Sivan Mahadevan, strategists at Morgan Stanley, recommend purchasing May $32 puts while selling May $27 puts.

The two said, “The competitive environment will thwart efforts to raise prices. Put spreads give downside exposure to cost inflation and excess inventory pressuring the stock.”

Most of this is predicated on the rising price of cotton, which has risen 13 percent just from February 24 through March 2.

China is behind the rising prices, as demand continues to grow while supply remains constrained.

For J.C. Penney and other relevant retailers, this will make a significant impact on margins and earnings.

J.C. Penney closed Thursday at $33.94, down $0.29, or 0.85 percent.

Monsanto (MON), Mosaic (MOS) Leading (MOO) Up

Shares of Monsanto (NYSE:MON) and Mosaic (NYSE:MOS) are helping push Market Vectors Agribusiness ETF (MOO) up, while the iPath DJ-UBS Cotton ETN (BAL) is up over 5 percent today on positive production comments.

The Department of Agriculture reported greater production by U.S. cotton farmers, as well as for soybean and wheat farmers as well, as agricultural prices are jumping again.

Farmers have been increasing inputs on the basis of rising food prices and demand, which appears to be not going away any time soon.

Even with the unrest in the Middle East and other concerns, people have to eat, and governments will do what they must to be sure they are in order to quell potential riots which is already unseating leaders.

Jim Rogers, Peter Schiff Remain Bullish on Gold

Jim Rogers and Peter Schiff have been gold bulls for some time, and also agree that the value of U.S. dollar will continue to diminish over time based on the misguided policies and practices of the Federal Reserve.

Rogers continues to maintain gold will rise for years to come, and believes it should be trading at about $2,000 an ounce, comparing to the the former all-time high of $850 an ounce after being adjusted for inflation.

Even so, he still says gold will eventually reach $2,000 sometime in the next decade.

Peter Schiff has been even far more optimistic, predicting gold price could rise as high as $5,000 an ounce. Schiff also believes the rise in the value of the U.S. dollar is just a temporary bump and it'll resume its loss in value.

Both oppose the policies of the Federal Reserve and see U.S. bonds as extremely negative at this time.

Concerning other commodities, Rogers still likes zinc and cotton, with cotton putting pressure on many companies with heavy exposure to it and lower margins.

He also likes silver, which many commodity experts think will be the trade of the next decade. He believes it could definitely reach $50 an ounce again, and possibly go much higher.

Goldman (NYSE:GS) Says Precious Metals Will Lead Commodities in 2011

Talking commodities today concerning 2011, Goldman Sachs (NYSE:GS) said they see precious metals leading the way, with gold reaching $1,690 in 12 months, while livestock performing the worst in the commodity sector.

Over the next year, Goldman sees precious metals rising 28 percent and livestock increasing by only 4 percent.

Goldman said in the report, “Extreme weakness in U.S. demand over the past two years has allowed China to grow unconstrained without any competition for raw materials. This is likely to change in 2011 with a stronger U.S. that is likely to bump up against a China that is consuming dramatically more commodities than pre-crisis.”

In order to cut back on American consumption, commodity prices will probably be pushed up in order to “to make room for further Chinese demand,” according to Goldman.

Precious metals specifically identified as being most affected were platinum and copper, and other commodities to be affected said Goldman, will be soybeans, cotton and crude oil.

As far as gold demand and prices, Goldman concluded, “A low U.S. real interest-rate environment will continue in 2011, particularly given the resumption of quantitative easing measures in the U.S.,” the analysts wrote. “However, as we look toward 2012, we find it timely to reiterate our view that at current price levels gold remains a compelling trade, but not a long-term investment.”

Pakistan Looking to Monsanto (NYSE:MON) for Cotton Solutions

Struggling with cotton productivity, Pakistan is in negotiations with Monsanto (NYSE:MON) to provide answers for the cotton industry in the country.

In a seminar addressing the issues, areas of interest covered included the "introduction of insect resistance and herbicide tolerance technologies, research collaboration between Monsanto and Pakistan Research Institutes, capacity building of local seed companies and technology fee payment by the Punjab government for any unauthorized spread off Monsanto’s proprietary technologies."

While noting the problems of scarcity of water, disease, insects, and enough seeds to plant aren't unique to Pakistan, they haven't put forth systematic efforst to deal with the problems in the cotton industry, which in their view includes working with a partner like Monsanto.

Per the negotiations, if successful, Pakistan would gain legal access to the technology of Monsanto, giving them access to their pipeline.

Particular products being looked at in the market include Monsanto’s CEMB single-gene and double-gene Bt, single-gene Bt, Chinese fusion gene Bt and double-gene Bt, Monsanto’s double-gene Bt (BG II), Roundup Ready and Roundup Ready (RR) Flex and BG II x BR Flex Stack.

Pakistan is also looking to Monsanto to develop a drought resistance cottong variety by 2018.