The latest forecast for grain production and farm income was revised upward, which has MoneyShow's Jim Jubak looking for some bargains.

For most of the year, news about the size of the global grain harvest, that it was going to be a record year in many, many of the grain producing areas, has been a kind of negative for farm-oriented stocks. The idea is that since there was going to be such a large harvest, grain prices were going to be down, and that was going to cut into farm incomes. You have things like Deere (DE) being under pressure, some of the fertilizer makers, but on November 26, the US Department of Agriculture came out with its forecast for farm incomes, and what it said, basically, was that the harvest in the US is going to be so large that even with falling prices, because of the size of the harvest, farmers are going to make more money, so they up their forecast for farm incomes—this is for the 2013/2014 harvest season—they up that forecast by about 8.6% from the August forecast, and if that forecast is right, we're looking at about 15% increase in farm incomes from the level in the 2012/2013 harvest year.

What's interesting about this to me, as an investor, is that, because the farm sector has been kind of negatively affected by a forecast of falling grain prices, these stocks have generally been really down for the year, but they've started to move up recently, I think on the sense that this is not the long-term trend, it's not lower incomes, but higher farm incomes. If you look at something like Deere, the stock looks like, well, if it's recently moved above its 50-day moving average, it looks like it might be headed to one of those positive crosses where the 50-day—which has been below the 200-day moving average—moves above it. That's usually a good sign. The other stock I'd like here would be Yara International, (YARIY) in New York, or (YAR.NO) in Oslo; doesn't make Potash, like Potash of Saskatchewan (POT).

Potash market is complete chaos because the cartel has collapsed. This is the largest maker, in terms of market share, of nitrogen-based fertilizers, so it's a different market and Yara would be another way to play these. Again, what you're looking at here is a sense that after all this pessimism about farm incomes, that it looks like they're going to be better than expected. You've got a lot of negative sentiment about earnings at a company like Deere in 2014, including from Deere, so there's a possibility for a positive surprise and in a market where everything seems to be very expensive, this would be a sector where you might be able to find some relative bargains.

This is Jim Jubak for the MoneyShow.com Video Network.