Friday, July 23, 2010

Commodities May Pause, Wheat in Particular, but Ag Traders are Being Hired

We like the softs. First up. Bloomberg:

Commodity Advance May Falter, Barclays Says: Technical Analysis
The recovery in commodities may be faltering as trading patterns are “throwing out bearish signals,” Barclays Capital said.

The attached chart shows that the Reuters/Jefferies CRB Index of 19 raw materials has lost 9 percent since climbing to this year’s peak of 293.75 in January. The index ended at 266.86 yesterday, below the 200-day average of 270.63, and was still in the so-called “downtrend channel” described by Barclays.

While the index yesterday jumped to the highest closing level since May 5, breaking the 100-day average, “it doesn’t materially change our view” about the risk that prices may keep declining, Philip Roberts, European chief technical strategist at Barclays, said in an e-mail to Bloomberg today. “To do that, the price would have to recover above the 200-day average,” he said in response to questions.

About 10 of the 19 raw materials in the index including natural gas, aluminum, copper, oil and raw sugar have dropped this year as economic expansion in China slowed, and investors became more concerned about the pace of the U.S. recovery and the resolution of Europe’s sovereign-debt crisis....MORE
 From FuturesMag:
Wheat prices headed down? 
Hot and dry weather around the world pushed wheat prices higher in July but analysts expect wheat to head down throughout August.

Mike O’Dea, risk management consultant at FC Stone, says several factors are moving wheat. “You’ve got short-covering around from the traditional spec funds. You have weather issues in Canada and most of the Black Sea exporting countries and that helped fuel some of the short covering. There’s new fund money coming into the market looking for a place to get parked,” he says. O’Dea expects wheat to go down to $5 a bushel by mid-August.

Finally, from eFinancialCareers:
A good job, if you’re prepared to be universally despised

Agricultural traders are in the news. On one hand, Anthony Ward, a former motorbike courier turned cocoa trader, has bought a large amount of cocoa.

On the other, banks in general, and Goldman Sachs in particular stand accused of driving up food prices through rampant speculation.

In the circumstances, working as an agricultural products trader may seem tantamount to disguising yourself as Tony Hayward and talking about ‘small people’ in the Gulf of Mexico.
However, agricultural derivatives are a large and growing product sector, and one that may offer more opportunities in future.

“Banks agricultural teams are fairly tiny,” says one commodities recruiter. “But SocGen, Deutsche and JPMorgan have all been building their desks this year.”
Given banks’ small teams, the real opportunities in soft commodities trading come with the funds sector and specialist trading houses. Various new agriculture funds have appeared this year, with prices expected to rise long term. Blackrock launched its Agriculture fund this week....MORE