Crop traders extend bullish streak on U.S. drought

Costs Increase

U.S. hog producers may lose about $20 per animal over the next three quarters, according to a July 9 report by Chris Hurt, an agricultural economist at Purdue University in West Lafayette, Indiana. Pig farmers in the U.K. are losing about 18 pounds ($28) a head, according to the Agriculture and Horticulture Development Board’s pork unit.

Costlier crops may curb demand from biofuel producers. U.S. ethanol output fell 2.3 percent in the week ended July 13 to the lowest level since the Energy Department began tracking weekly data in 2010. Producers are losing about 26 cents on each gallon of ethanol made based on fuel and corn contracts for September, data compiled by Bloomberg show. More U.S. corn went to ethanol than livestock feed in 2010-11 for the first time ever.

Limited Production

Farmers will buy more fertilizer next year as they try to recoup crops lost this year, according to Karen Ubelhart, an analyst for Bloomberg Industries. Growing demand for food and limited production growth will support nutrient prices, Yara International ASA, the largest publicly traded nitrogen- fertilizer maker, said July 18. The Oslo-based company’s shares jumped 25 percent since mid-June and will gain 11 percent in 12 months, according to the average of 27 analyst estimates compiled by Bloomberg.

In other commodities, seven of 12 traders and analysts surveyed by Bloomberg expect raw sugar to advance next week and four were bearish. The commodity fell 0.6 percent this year to 23.17 cents a pound on ICE Futures U.S. in New York.

Eleven people surveyed said copper will gain next week and six predicted a drop, while nine were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, gained 0.2 percent to $7,615.50 a ton this year.

Ten of 26 traders and analysts surveyed said gold would increase next week and the same amount predicted little change. Futures on the Comex exchange in New York added 0.7 percent since the start of January to $1,577.10 an ounce, after 11 years of gains. Holdings in bullion-backed exchange-traded products are about 0.4 percent below the record 2,413.6 tons reached July 5, data compiled by Bloomberg show.

Stimulus Measures

Federal Reserve Chairman Ben S. Bernanke repeated in congressional testimony July 18 that the central bank is ready to take further action to boost the recovery if necessary. China cut rates in June and July, the European Central Bank reduced borrowing costs to a record low this month and the Bank of England restarted bond purchases two months after halting its expansion of stimulus.

“The most important thing is that we’re seeing signs that China is starting to stimulate much more aggressively,” said Dan Smith, a commodities analyst at Standard Chartered Plc in London. “There have already been a lot of coordinated rate cuts. Once you get this stimulus coming though often that means you’re close to the bottom of the cycle for commodities.”

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Gold survey results: Bullish: 10 Bearish: 6 Hold: 10
Copper survey results: Bullish: 11 Bearish: 6 Hold: 9
Corn survey results: Bullish: 19 Bearish: 5 Hold: 3
Soybean survey results: Bullish: 20 Bearish: 5 Hold: 3
Raw sugar survey results: Bullish: 7 Bearish: 4 Hold: 1
White sugar survey results: Bullish: 7 Bearish: 4 Hold: 1
White sugar premium results: Widen: 8 Narrow: 1 Neutral: 3

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Bloomberg News

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