Thursday, November 8, 2012

"Morgan Stanley 'bullish' on ags, but with a caveat"

You may have wondered why we haven't posted on agricultural recently.
It's simply explained:
The commodities have settled into a price rut while the equities are trending down with just enough whipsaws to stop you out with small losses.

Our last ag post was Oct. 31's pair trade, long CAT/short DE:
Chartology: Deere vs. Caterpillar (CAT; DE)
It's working but barely, and definitely not today.

Here's the headline story from Agrimoney:
Morgan Stanley sounded a mixed note for agricultural commodity values, even as data showed many hedge funds giving up on price gains for now, slashing long exposure to corn and cotton futures on particular.
The bank said that it was "bullish" on agricultural commodities, in particular corn, saying it "still" saw the need for prices "to move higher, and possibly trading into the double digits" in terms of dollars per bushel to ration demand following a disappointing US harvest, the world's biggest.
"Physical US and global corn inventories remain precariously low," Morgan Stanley analysts said.
"Corn prices need to remain elevated to continue incentivising acreage expansion in Brazil."
Corn for December stood at $7.40 ¾ a bushel in breakfast-time deals in Chicago on Monday, a gain of 0.2%.
'Asymmetric upside risk'
The bank also rated wheat among its most bullish bets in the commodities sector, saying that the prospect of a switch from corn to wheat in livestock feed, following a poor wheat harvest in the former Soviet Union, "will likely cause US and global wheat stocks fall to near or below average levels"....MORE