Byron Wien, chief investment strategist at Pequot Capital announced his 10 surprises for 2008. (This is the 23rd year of this annual list.) Number six reads "Agricultural commodities remain strong. Corn rises to $6.00 a bushel and cotton to $.85 a pound. Gold reaches $1000 an ounce as disillusionment with paper currencies spreads across Asia."
The California Public Employees Retirement System (or Calpers), the top U.S.public pension fund, plans to expand its commodity-related staff in March as it increases inflation-linked investments-some of which will be linked to the S&P Goldman Sachs Commodity Index.
Purdue University economist Chris Hunt says that soybean prices have to go to $17 a bushel to match what they did in relative price terms in 1973-‘75. He sees soybean trading between $9-$13/bushel under the most likely scenarios in 2008. If soybeans go that much higher, that's all the reason needed for the corn market to go up too.
There were two big surprises in Friday's U.S. Department of Agriculture (USDA) reports. The first one was winter wheat acreage, which came in on the low end of trade expectations at 46.6 million acres. Farmers are looking to fill the demand for feed grain and soy and soy products, and will let the rest of the world grow wheat. That leaves a little more acreage to grow corn and soybeans in our country.
The big surprise in USDA reports was the reduction in corn carryover by 300 million bushels, attributed to a 5.3% increase in feed usage. The demand scenario for corn is hitting on all cylinders. This week's numbers on corn exports will continue to be robust, with the export sales of corn to Taiwan, South Korea, and unknown destinations last week showing no signs of backing off from foreign buyers helped by the weak dollar.
Seasonal Trades
Buy March Wheat {KCBT} and
Sell March Wheat {CBOT}, profitable 13 out of the last 15 years, entry date 1/7, exit date 2/27
Buy July Wheat {CBOT} and
Sell March wheat {CBOT}, profitable 15 out of the last 15 years, entry date 1/9, exit date 2/9
Buy July Soybean oil, profitable 14 out of the last 15 years, entry date 1/29, exit date 3/19
