Gold Bulls Lured Back for First Time in Two Months: Commodities – Bloomberg 10-20-14

Salient to Investors:

  • Eric Zoldan at JHS Capital Advisors said that over the last two weeks, it is much clearer that while money is flowing out of all asset classes, it is not flowing out of the gold market, and that deteriorating global growth and demand is leading investors back to gold.
  • Bank of America Merrill Lynch lowered its 2015 outlook for gold to $1,225.
  • Rob Haworth at US Bank Wealth Mgmt said gold prices are indicating a short-term shift in market sentiment rather than a change in underlying fundamentals – US fundamentals remain good, while European fundamentals are not horrible, and the economic story is not falling apart.
  • Ashmead Pringle at GreenHaven Commodity Services said corn and soybeans have bottomed here for a while as the big harvest has been discounted, and the harvest still has a good way to go in the major corn areas,
  • American consumer confidence rose is at the highest in 7 years.

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Gold Bulls Extend 2014 Exit as Slump Erases $6.7 Billion – Bloomberg 09-22-14

Salient to Investors:

  • Gold held in ETPs are the lowest in 5 years, gold’s 60-day volatility is near a 5-yr low, and open interest near the lowest since 2009.
  • Brian Levitt at OppenheimerFunds sees no compelling reasons to be in gold, and said no inflationary pressures and a Fed that will tighten sooner than most of its trading partners portends a strong dollar and weaker gold prices.
  • Aram Shishmanian at the World Gold Council said the expansion of trading hubs in Asia will boost demand in China by 20% in 3 years.
  • George Gero at RBC Capital Markets sees a gradual return of retail buyers, says the gold price is very attractive, and expects more buying out of China and India ahead of the festival and marriage season. Gero cites much political turmoil in 2014, and says people want to hedge the bad things happening in the world.
  • Mayer Cherem at Pacific Alternative Asset Mgmt said everything comes back to fundamentals in the agricultural sector – the global crop situation is very comfortable, and there are expectations of big harvests for most crops – and sees much more downside in soybean prices, and weaker corn prices.

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Palm Oil Seen Dropping as Mistry Has Buy Call on Planters – Bloomberg 09-15-14

Salient to Investors:

Dorab Mistry at Godrej Intl said:

  • Palm oil at a 5-year low creates a buying opportunity for plantation and processing company stocks because producers are still making money.
  • Invest in plantations when palm oil prices are low. In Q4, 2008, when in a similar situation with regard to supply, demand and price, palm oil rapidly made itself competitive and exported its way out of a crisis as Malaysian stocks peaked in December 2008.
  • Prefer processing companies which manufacture specialty fats, oleochemicals, biodiesel and own consumer brands. Upstream companies will benefit when the price cycle turns.”
  • Expects prices to drop 9.6 percent to $588 a metric ton in the next few weeks towards Asian growers’ production cost but not below.
  • Full-year output in Malaysia, the second largest grower, will be more than initially estimated, while production at the largest grower, Indonesia, is also ahead of expectations.
  • Stockpiles will continue to rise and peak in December. Chinese imports will remain thin for at least the next 3 months as high-priced stockpiles are used up.
  • After the record US soybean crop this summer, farmers in Brazil and Argentina may switch to soybeans from corn this year. Argentina will devalue its currency to boost its overseas shipments.

Adrian Foulger and Denis Chai at Standard Chartered recommend plantation stocks to profit from a rebound in prices, and say the way to make money in the palm sector is to buy growth operators when prices are low and sentiment is weak.

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Gold to Coffee Drive Bullish Bets to 17-Month High – Bloomberg 02-25-14

Salient to Investors:

Hedge funds’ net-long positions of 18 US-traded commodities rose 18 percent last week to the highest since September 2012. Investors tripled the net-long position in arabica coffee this month to the most bullish since May 2011

Barclays said weather is the big driver of commodities.

EPFR Global data show commodity funds are headed for the first monthly inflows since September 2013.

Brazil is having its weakest rainy season in decades, just when moisture is needed the most for coffee tree roots to absorb soil nutrients.

Rabobank Intl said yields and quality for arabica beans will be constrained during this season and the next, and prices will be supported by longer-term concern that output will be limited.

Rabobank said soybean production in Brazil and Argentina is still projected to climb 10 percent, even with the dry weather. The USDA said corn and soybean harvests in the US in 2014 will be the biggest ever, meaning an increase in stockpiles before 2015’s harvest.

Dan Cekander at Newedge USA said grain fundamentals themselves do not suggest a bull story – not without a significant Northern Hemisphere problem in 2014.

Goldman Sachs said the S&P GSCI Enhanced Commodity Index will fall 4.3 percent in the next 12 months, agriculture will decline 9 percent, and precious metals will fall 14 percent.

Gold bets climbed 31 percent to the highest since October 29.

David Mazza at State Street Bank & Trust said assets in the SPDR Gold Trust are heading for the first monthly inflow since December 2012.

Cameron Brandt at EPFR Global said commodity funds are heading for their first monthly inflows since September.

Mark Luschini at Janney Montgomery Scott said the decline in prices last year has helped re-establish equilibrium between supply and demand, so better growth should pull industrial commodities higher, though we are not back in the middle of a commodities super cycle yet.

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Goldman Bullish With Hedge Funds Amid Citi Warning: Commodities – Bloomberg 12-18-12

Salient to Investors:

EPFR Global said the increase in inflows into commodity funds in 2012 was 92 percent higher than the increase in 2011. The S&P GSCI, of which energy comprises 70 percent, fell 0.9 percent in 2012, the MSCI All-Country World Index  rose 13 percent, the Dollar Index fell 0.9 percent, Treasuries returned 2.3 percent. Barclays says commodity assets under management rose 8.6 percent in the first 10 months of 2012, gold-backed ETP holdings rose 12 percent.

Hedge funds’ reduced bullish bets in Q4 2012, which are 51 percent higher than a year ago. 131 traders, investors and analysts expect precious metals to rise as much as 25 percent in 2013, grains to rise 18 percent, and industrial metals to rise 16 percent, and other commodities at least 9.9 percent.

Edward Morse at Citigroup says price rises in 9 of the past 10 years are creating supply gluts. Citigroup says the super cycle of returns has ended because China is growing more slowly and supply has caught up. Citigroup sees grain and soybean prices being supported in half1 2013 by tight supplies.

Barclays and Rabobank Intl say output will exceed demand next year in 10 commodities.

Goldman Sachs expects gold to peak in 2013 due to rising U.S. growth. Jeffrey Currie at Goldman Sachs says accelerating economic growth in half2 2013 will increase demand, and sees a 7 percent return in commodities over 12 months. Currie says increasing consumption will curb available supply, boost near-term prices relative to longer-dated contracts.

Peter Jankovskis at Oakbrook Investments said the disparity in outlooks is due to uncertainty about the economy and government policies over the next year.

Hussein Allidina and Peter Richardson at Morgan Stanley say demand for energy and grains will be resilient and delayed harvests in South America will limit corn and soybean supplies, while economies will accelerate in half2 2013 if central banks extend stimulus. Morgan Stanley said central-bank stimulus will cause investors to continue to buy gold, which will average $1,853 an ounce in 2013,

Jack Ablin at BMO Private Bank said commodities tend to be victims of their own success – we have unprecedented inventories in industrial metals.

The IMF expects world growth to rise to 3.6 percent in 2013. The median economist expects China to accelerate in Q4.

James Paulsen at Wells Capital Mgmt says there’s a good undertow for commodities, which will trend higher the next few years.

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Drought No Obstacle to Record Income for U.S. Farms: Comm – Bloomberg 11-20-12

Salient to Investors:

US farmers are having their most-profitable year ever because of record-high prices and insurance claims and despite the worst drought in a half century.

The government predicts food inflation will accelerate next year, led by meat, dairy and baked goods.

The UN said says the global cost of food imports will drop 10 percent in 2012 – world food prices are 10 percent below the record in February 2011.

The government predicts an 8.6 percent drop in US wheat, soy and corn exports next year. Informa Economics says global corn production may jump 14 percent next year as wheat output gains 7.5 percent.

Bullish bets by hedge funds et  al across 11 U.S. farm goods declined in 9 of the past 10 weeks.

Richard Pottorff at Doane Advisory Services said insurance payouts will surge because most policies were linked to prices at the harvest.

Farm income has more than doubled since 2006, and 3 consecutive years of record profit left US farmers with a ratio of debt to assets of 10.2 percent,  a record low.

Farmland in Iowa rose 18 percent in the year that ended Oct. 1. Alex J. Pollock said the surge in farmland prices signals the market may be in a bubble, vulnerable to higher interest rates and lower crop prices.

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Brazil Seen Beating U.S. in Soybean Trade as China Buys – Bloomberg 10-31-12

Salient to Investors: 

Rising supply from Brazil potentially hurts demand for US beans.

Rabobank Intl said Brazil will displace the US as the largest soybean grower this year and may extend that lead as planting is expanded to meet increased demand from China, the biggest buyer. Jasper van Schaik at Rabobank said Brazil’s share of China’s imports has jumped 10-fold since 2000.

Production in Brazil is up 53 percent in the past decade versus 7 percent in the US.  Brazil bans foreigners from owning land.

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Commodities Beat Stocks, Bonds for Second Month in August – Bloomberg 09-03-12

Salient to Investors:

Commodities beat equities, bonds and the dollar for a second consecutive month, the longest streak in more than a year, showing investors expect policy makers to succeed in stimulating growth.  More than two-dozen nations cut market interest rates this year. China has slowed for six quarters.

Bill O’Neill at Merrill Lynch said the market has clearly taken a very sanguine view

Raw materials entered a bull market last month after rising more than 20 percent since mid-June, erasing 2012’s losses.

Goldman Sachs predicts oil will advance 19 percent to $115 in three months, soybeans 14 percent to $20, and corn 13 percent to $9.

Hedge funds own close to their biggest bet on rising raw-material prices since May 2011.

71 percent of S&P 500 companies reported quarterly earnings that beat analyst expectations.

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Global Food Reserves Falling as Drought Wilts Crops – Bloomberg 08-09-12

Salient to Investors:

Stockpiles of the biggest crops will decline for a third year on drought in three continents.

U.S. crops are in the worst condition since 1988, heat waves are battering European crops and India’s monsoon rainfall is 20 percent below normal.

Goldman Sachs, Macquarie Group and Credit Suisse say crops will continue to be the best-performing commodities this year.

The U.S. drought in June was the widest since December 1956, while the past 12 months were the hottest on record.

U.S. nuclear plants’ output on July 27 was the lowest for the day since 2001 because water was too hot to be an effective coolant.

Global food prices are still 10 percent below the record reached in February 2011.

Barclays  is “modestly overweight” in grains and soybeans, but recommended investors reduce bullish bets as improving weather, declining demand or an easing of U.S. requirements for ethanol in gasoline may send prices lower

Goldman predicted $9 corn, $20 soybeans, $9.80 wheat in three months.

Danske Bank predicts global food prices will jump 25 percent this year .

Gates Foundation says U.S. households spend 6 percent of their total expenditures on food versus 35 percent in India and 45 percent in Kenya. The USDA says with less than 5 percent of the world population, the U.S. consumes 31 percent of global corn production, 18 percent of soybeans, 32 percent of cheese and 20 percent of beef and veal.

The National Intelligence Council says nations reliant on food imports, including Egypt, Pakistan, Bangladesh and Sudan, are especially vulnerable to unrest. More than 60 food riots erupted worldwide from 2007 to 2009 as prices surged, the U.S. State Department estimates, while the U.N. says production will need to expand 70 percent by 2050 as 2 billion people are added to the population.

Professor Tim Hagle at the University of Iowa says retail-food costs keeps the economy in a fragile position, the big issue in this election.

Steve Hatz at Bank of the West said U.S. farmers are less likely to feel the pinch because about 85 percent of crops are insured.

Ron Plain at the University of Missouri said livestock ranchers lost $260 a head in June versus a $156 loss a year earlier.

Steve Shafer at Covenant Global Investors said global beef inventories are dropping in part because rising incomes in emerging markets mean consumers want to eat more meat, causing a rising supply/demand imbalance.

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Bull Market in Crops Extends With Drought: Commodities – Bloomberg 08-03-12

Salient to Investors:

Corn and soybean traders are bullish for a 15th consecutive week. Hedge funds are holding the biggest bet on higher corn prices since September and almost the largest bet on soybeans since at least 2006.

24 percent of  U.S. corn crop and 29 percent of soybeans were in good or excellent condition as of July 29, the lowest rating for the date since 1988.

Heat waves in Europe are damaging crops from Italy to Russia.  As many as 400 of India’s 627 districts received lower-than-average rainfall this year.

Bayram Dincer at LGT Capital Management said a higher degree of stimulus is needed to support commodity demand and prices – EU austerity measures and unsolved debt problems will cap commodity prices due to slower demand growth.

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