Bloomberg News

Corn, Soybeans May Extend Gains on Weather, Mirae Asset Says

September 02, 2011

(Updates prices in fifth paragraph.)

Sept. 2 (Bloomberg) -- Corn and soybeans may extend gains, outperforming other agricultural commodities, as worsening weather in the U.S. hurts crop yields and tightens supplies, according to Mirae Asset MAPS Global Investments.

Increasing feed-grain demand led by China and low inventories should also push up corn and soybean prices, Kwon Jung Hoon, manager of South Korea’s biggest agriculture- commodity fund, which is run by Mirae Asset MAPS, said in an interview yesterday. Investment demand for commodities, including metals, is expected to increase in the Asian nation as people seek methods to hedge against rising inflation, he said.

Corn prices have jumped 20 percent since July 1 after an 18 percent drop in May through June in Chicago and soybeans touched a three-year high on Aug. 31. Morgan Stanley joined Goldman Sachs Group Inc. last month in lowering estimates for corn yields in the U.S., the top grower and exporter of the two commodities, citing unfavorable weather and poor crop conditions.

“Crop conditions hold the key in the second half,” Kwon said in Seoul. “Weather conditions in the northern hemisphere have deteriorated since August and that will likely help boost prices in the second half, especially for corn and soybeans.”

Corn futures for December delivery gained 1 percent to $7.455 a bushel on the Chicago Board of Trade at 3:53 p.m. Seoul time. November-delivery soybeans rose 0.6 percent to $14.425 a bushel.

Corn, used in food, livestock feed and biofuels, is the second-best performing commodity in the past year on the Standard & Poor’s GSCI Commodity index. Wheat gained 8.2 percent and cotton rose 19 percent, respectively.

Inflation Hedge

Farm commodities offer a “right” method to hedge against inflation as rising food costs fuel consumer prices, Kwon said. South Korea’s inflation accelerated to the fastest pace in three years in August on rising food prices.

South Korea’s consumer prices rose 5.3 percent from a year earlier last month after increasing 4.7 percent in July, the government said yesterday. That exceeded all 11 forecasts in a Bloomberg survey of economists.

Speculators increased bullish bets on agricultural commodities to the highest level since early May in the week through Aug. 23, U.S. government data compiled by Bloomberg show.

Rising Demand

Commodity-backed funds doubled to about 1.8 trillion won ($1.7 billion) in terms of assets under management from Jan. 2, 2009, to Aug. 1, according to data from FnGuide Inc., a financial market data provider.

“There’s more room for commodity funds to grow in the Korean market,” Kwon said. “The inflation risk will continue to rise, boosting investors’ needs to guard against it.”

Commodity assets under management rose $8.3 billion in July, the biggest inflow since December 2010, to $431 billion, Barclays Capital said in a report on Aug. 24. The S&P GSCI index of 24 commodities has climbed 30 percent in the past year and the MSCI World index gained 7 percent.

The Mirae Asset MAPS Rogers Agriculture Index Derivative Investment Trust, which tracks the Rogers International Agriculture Commodity Index, has returned 44 percent in the year through Aug. 31, according to the company. The fund has 100.5 billion won in assets. Mirae Asset MAPS is an affiliate of South Korea’s biggest mutual fund manager.

--With assistance from Saeromi Shin in Seoul. Editors: Jarrett Banks, Richard Dobson

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net.

To contact the editors responsible for this story: Richard Dobson at rdobson4@bloomberg.net


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