Friday, December 30, 2011

"Corn, cotton futures offer chance of hefty gains"

I'm not so sure about corn but am intrigued as all get out by cotton.*
Corn 645 up 7 cents, cotton 91.61 down .02
From Agrimoney:
Corn, lifted by relatively short supplies, and cotton, helped by a Chinese market support programme, look top bets among agricultural commodities next  year, offering investors the prospect for gains above 25%.
Corn looks set to return above $7 a bushel by the second half of next year boosted by strong demand from all three major consumers - livestock feeders, ethanol plants and importers, Commerzbank said.
Indeed, this will be enough to keep supplies tight even if the South American corn harvest escapes significant damage feared from this month's dry and hot spell, and if US plantings rise in 2012 to a 68-year high, as currently expected.
"Even if the corn acreage is being expanded, corn should remain in relatively short supply given the robust demand," Commerzbank said.
Corn prices will rise sufficient to regain a significant, if historically unusual, premium over fellow grain wheat, averaging $7.20 a bushel in the last quarter next year – implying gains of more than one-quarter for investors buying Chicago's December 2012 corn contract....
...Chinese buying
Among soft commodities, cotton has potential for handing investors strong gains, with the bank forecasting that investors are being too gloomy in foreseeing New York futures prices remaining below 90 cents a pound.
Lower prices will, in dissuading farmers from planting the fibre, keep supplies in check, pointing to firmer values, which will also be encouraged by a policy in China, the top cotton producer, consumer and importer, of buying up supplies.
"State authorities are currently buying cotton on the domestic market at the equivalent of 140 cents a pound and thus at significantly higher prices than on the world market.
"Chinese manufacturers will therefore increasingly resort to the cheaper cotton on the global market."
The bank forecast cotton prices reviving to average 110 cents a pound in the last half of 2012 – also implying gains of more than one-quarter for investors....MORE
 *See (Dec. 15): 
...So what does it mean for investors?
Back in September we posted "Pray for Texas (and maybe buy some cotton futures): 'Historic La Nina imminent?". Since then cotton futures have drifted lower:


but the trade is definitely worth being aware of. A reasonable target would be the bottom of the chart gap in the 130 area a ~50% move from this morning's 85.680.