Tuesday June 10, 2008

Chicago CBOT corn price hits record $7.20 per bushel, wheat and soy up

news.yahoo.com :

Chicago corn futures rose to an all-time high on Monday [9 Jun 2008] on crude oil's surge to a record high above $139. Corn and soybean prices were also boosted by worries about young U.S. crops, due to torrential rains in the country's heartland. The lead July 2008 corn futures contract rose as high as $6.72 per bushel, a record for a spot contract. The new-crop July 2009 corn contract scaled an all-time peak of $7.20 per bushel. Worries about tight fundamentals, such as low stocks and high demand, was likely to continue feeding the rally in corn, market participants said.

Other grain and oilseed futures were also expected to remain strong. The July 2008 wheat futures contract climbed as high as $8.38 per bushel. The July 2008 soybean futures contract rose as high as $14.87 per bushel, up about 2% compared with Friday's close of $14.57. U.S. rough rice, which initially bucked the trend and dipped, recouped earlier losses. July rice rose more than 2% to $20.40 per hundredweight, after it ended on Friday at $19.96.

- Therein lies the beauty of the equally-weighted agricultural commodities ETF, the PowerShares DB Agriculture Fund, listed on AMEX as DBA. With its 25% equal weighting each to wheat, corn, sugar, and soybeans, if one component dips, there is a good chance that the others will compensate for it. For example, while wheat was all the rage just a while ago, corn did not do as well, but now it is corn's turn to do the heavy lifting. There was talk earlier about farmers planning to plant more wheat and less corn due to the record wheat prices - and guess what happens next - we get record corn prices.

Both as an individual investor and fund manager, I do not have any particular preference between one agricultural commodity or another. I look at it from an asset allocation point of view, and DBA fits well into my allocation plan as the pure commodity price play for the agricultural sector. In addition to the pure price play, I have allocated an equal portion to the "agricultural majors" as well - this role is filled by the aptly-named MOO, the Market Vectors Agribusiness ETF which is also listed on AMEX.

See also :

1. As corn price rises, so could food bills
2. Wheat breaches $12 for first time after biggest gain since 2002
3. Bread and inflation
4. Rice price jumps to record high after doubling since 2007
5. Why food costs more

(2008-06-10 09:27:58 SGT) [Biz] Permalink

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