Bloomberg News

Corn Extends Best Run in Year With Goldman Bullish: Commodities

January 18, 2013

Corn Extends Best Run in Year With Goldman Bullish

The grain rose for eight successive days to $7.3125 a bushel by Jan. 16 as the USDA said global inventories by Sept. 30 will be 1.4 percent lower than previously expected and, relative to consumption, the smallest since 1974. Photographer: Ty Wright/Bloomberg

Corn traders are the most bullish in seven weeks as forecasts for the smallest stockpiles relative to demand since 1974 prompted the longest rally in a year and Goldman Sachs Group Inc. to predict near-record prices.

Eighteen analysts surveyed by Bloomberg expect futures to gain next week and six were bearish. A further five were neutral, making the proportion of bulls the highest since Nov. 30. Global consumption will exceed output for the second time in three years after drought from Europe to the U.S. parched crops, the U.S. Department of Agriculture says.

The grain rose for eight successive days to $7.3125 a bushel by Jan. 16 as the USDA said global inventories by Sept. 30 will be 1.4 percent lower than previously expected and, relative to consumption, the smallest since 1974. Prices had slumped for five weeks and hedge funds cut bets on a rally by 59 percent since December on expectations that South American harvests in the first half of the year would boost supply.

“We’re going to see a destocking in the world of grains and products, and everyone is going to finish the season very tight,” said Chris Gadd, an analyst at Macquarie Group Ltd. in London. “Prices need to go to $8 a bushel at least in the second quarter to do the job of slowing down demand.”

Corn Prices

Corn rose 4 percent to $7.26 on the Chicago Board of Trade this month, extending last year’s 8 percent advance. Prices will jump 14 percent to $8.25 in three months, 2.8 percent below the Aug. 10 record, Goldman said Jan. 13. The Standard & Poor’s GSCI gauge of 24 commodities gained 1.8 percent since the start of January and the MSCI All-Country World Index (MXWD) of equities increased 3.3 percent. Treasuries lost 0.5 percent, a Bank of America Corp. index shows.

World stockpiles will drop 12 percent to a six-year low of 115.99 million metric tons by October, the USDA said Jan. 11. Inventories in the U.S., the top grower and exporter, slid 17 percent from a year earlier to 8.03 billion bushels (204 million tons) on Dec. 1.

Supplies dwindled as dry weather curbed yields, boosting prices to a record $8.49 in August. There was still moderate to exceptional drought across 53 percent of a nine-state Midwest region by Jan. 15, the U.S. Drought Monitor showed. U.S. corn planting begins in April. The International Grains Council said yesterday that global output will drop 3.6 percent to 845 million tons in the 2012-13 crop year.

Livestock Feed

The slump in prices to a six-month low on Jan. 7 may boost demand for livestock feed. The USDA said domestic meat and poultry production this year, as well as feed consumption, will be bigger than previously expected.

Hedge funds and other speculators cut bullish bets for five consecutive weeks and held a net-long position of 115,113 futures and options by Jan. 8, the least since June 26, U.S. Commodity Futures Trading Commission data show. Futures for delivery in September, just before the next Northern Hemisphere harvest, are trading at $6.12 in Chicago.

Some growing nations may bolster supply. The USDA raised its forecast for Argentina’s harvest by 1.8 percent to a record 28 million tons. Brazil, the third-biggest shipper, after the U.S. and Argentina, will reap 71 million tons, about 1 million tons more than the agency had predicted in December.

U.S. export sales of corn in the four weeks though Jan. 10 were 68 percent lower than in the same period a year earlier, the USDA said yesterday. The London-based IGC expects corn consumption to drop 1.1 percent this year to 865 million tons.

Grain Stockpiles

Costlier crops may curb demand from biofuel producers. U.S. ethanol production fell to 784,000 barrels a day in the week ended Jan. 11, the lowest since the Department of Energy began compiling the data in June 2010. Stockpiles are up 14 percent since reaching a 10-month low in November.

More U.S. output and bigger harvests in China and Europe are needed to ease the mounting concern about supply, said Liliana Balbi, a senior economist at the United Nations’ Food & Agriculture Organization. An index of the cost of 55 food items tracked by the Rome-based FAO slipped for a third month in December, falling 1.1 percent. The gauge is still 6.7 percent above the five-year average.

In other commodities, 17 of 30 people surveyed anticipate higher soybeans prices next week and nine said the oilseed will drop, while 17 of 28 said wheat will gain and seven expect a retreat. Soybeans rose 1.1 percent to $14.245 a bushel in Chicago this year as wheat added 1 percent to $7.86 a bushel.

Nine of 17 surveyed expect raw sugar to fall next week and seven predicted a gain. The commodity slid 5.4 percent to 18.45 cents a pound on ICE Futures U.S. in New York this year.

Metal Exchange

Sixteen people surveyed said copper will rise next week, seven predicted a drop and five were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, increased 1.7 percent to $8,067.25 a ton this year.

Nineteen of 33 traders and analysts surveyed said gold would advance next week and 10 were bearish. Bullion rose 0.8 percent to $1,688.15 an ounce in London this year after advancing the previous 12 years, the longest run of gains in at least nine decades.

The S&P GSCI gauge of raw materials climbed for five straight weeks through Jan. 11, the best run since September, and global equities reached a 20-month high this week. The U.S. economy picked up across much of the country last month, boosted by auto and home sales, the Federal Reserve said Jan. 16. China’s economy expanded for the first time in two years in the fourth quarter and will accelerate this quarter and next, according to as many as 36 economists surveyed by Bloomberg.

“Economic data out of the U.S. and China has surprised to the upside and that’s increased economic optimism,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “There’s still potential for further gains from here. China is the most important consumer of commodities and the most important driver of growth in demand.”

Gold survey results: Bullish: 19 Bearish: 10 Hold: 4
Copper survey results: Bullish: 16 Bearish: 7 Hold: 5
Corn survey results: Bullish: 18 Bearish: 6 Hold: 5
Soybean survey results: Bullish: 17 Bearish: 9 Hold: 4
Wheat survey results: Bullish: 17 Bearish: 7 Hold: 4
Raw sugar survey results: Bullish: 7 Bearish: 9 Hold: 1
White sugar survey results: Bullish: 8 Bearish: 7 Hold: 2
White sugar premium results: Widen: 4 Narrow: 5 Neutral: 8

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Whitney McFerron in London at wmcferron1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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