Commodity Prices (grains & cattle)

[Deleted]

Based on the price of DBA (powershares DB Agriculture)

The index is a rules-based index composed of futures contracts on some of the most liquid and widely traded agricultural commodities – corn, wheat, soy beans and sugar. The index is intended to reflect the performance of the agricultural sector.

With all the geopolitical problems...and the huge drought in Asia, this is now where i see a possibility of making some serious money in 2011. Food prices have been climbing....especially a few commodities like cocoa and coffee.

The question is....where are prices heading in 2011 for these products?

Disclaimer: I purchased stock and options of this ETF today

[verrip1]

Wow. I bought DBA today, too. I doubled my holding and it's now up to 3.5% of portfolio.

This is an odd coincidence.

[verrip1]

I thought 25% was too enthusiastic, and since I'm a conservative guy, I voted for 10%. I'd guess more like 14-17% on the calendar year.

[wyouser]

I agree 25% is a bit much but 14-17 is more realistic

[Deleted]

As the money flows out of metals (commodities), this will be where some of it ends up

I am hoping for a 20% return...but i can forsee this going much higher

[Aman A.K.A. Ahamburger]

I'm going with 15% this year and 20% next..

[tyfighter3]

It's all in the weather friends. Farmers had a good fall with getting their crops out and their land tilled and fert. put on. With all of this snow. winter wheat should go through the winter real good and be able to have a good start in the spring. If corn gets planted in April and Beans in May, we should have really good yields for next year, so keep a eye out over the next 2 months on WEATHER related matters. 3 Country's to keep a eye on and they are the USA, Brazil and Australia.

[Aman A.K.A. Ahamburger]

It's all in the weather friends.

Bingo!!!

[Deleted]

Major drought in China

Major drought in Australia (and flooding in the other part from a CAT 5 typhoon)

Major drought in Brazil

Weather will definitely impact this investment...i am counting on it

But the events in the middle east could also have an impact....

Going to be an interesting year.....

[craig]

I agree with the weather comment but with the way other commodities such as cotton have increased that will take corn and soybean acres away from last years totals and put more pressure on them also last year was great yield wise so I would expect lower average yields on less acres. Things could get interesting.

[verrip1]

Soybeans have an extra value. We export massive quantities of soybeans to China. Nice to have something that we can tug at them with as they limit rare earth production.

[jarhead1976]

I say less than 10%. The beef head count are at there lowest since 1958. Cattlemen sell off , when corn prices go up. Less beef, less feed. Corn will stabilize . Didnt the post first relate to corn and beef and not other grains?

[Deleted]

Jarhead

The DBA ETF tracks beef along with other commodities (wheat, corn, soybeans, coffee, cocoa, etc) which it buys futures in

Per a number of people on this board....inflation is here. If so, this ETF should show great profit this year. In this case, i put my money where my insight is....i may be wrong....but this is what i see coming.

I am looking for at least a 20% return in 2011 on this fund.

[jarhead1976]

As long as interest rates stay low..? Respects and good luck

[Aman A.K.A. Ahamburger]

Stay with that thought because we have MANY things we can hold over their heads and repay them with...not just $$$$

Yep!! Just like the man says verrip, stay with that thought!!

[neohguy]

Most of the rise in commodity markets is not due to actual shortages imo. It is due to people and institutions having too much money and chasing anything that has a pulse. I don't care if it's rice, stocks or gold. The 11% rise in the price of rice in four days has nothing to do with supply (of rice) vs demand.

www.zerohedge.com/article/rice-takes-out-december-2009-highs-next-stop-20-china-distributes-fake-plastic-rice

[Deleted]

agreed...but there are food issues out there.....and weather issues

and if one wants to "play" a commodity, this one seems to have more merit

[neohguy]

Feb 3, 2011 12:48:13 GMT -5 @gdgyva said:

agreed...but there are food issues out there.....and weather issues

and if one wants to "play" a commodity, this one seems to have more merit

This is why I agree with some of our posters that talk about failed monetary policy. There is a small minority of the worlds population driving up the cost of basic commodities that the majority of the world population spends the majority of their income on for survival. The "play" is not worth the resulting misery and suffering.
I believe we really have to re-examine our priorities. I'm not preaching because I'm not without fault, but, the current mindset won't end well.

[nicomachus]

Unfortunately, unlike in the 1930s, we have no real agriculture economists in politics right now. Vilsack, aside from being on the payroll of the big agribusiness, also lacks the economic know-how.

In the 30s, FDR at least realized that an economy whose food prices were stable was its way to true stability, and to that end hired Henry Wallace and Rexford Tugwell, two highly intelligent agricultural economists.

Their solution, which by the end of the 30s was considered one FDR's best (though Republicans would come to forever hate it) was to artificially keep grain commodity prices high.

(This of course is simplified).

Unfortunately, in my life time I have seen some great cornfields become WalMarts.

I expect food prices and other commodities to rise this year. I'd be surprised if it hits double digits, but I think it will feel like it to anyone struggling, so I voted 10%

[Deleted]

Neoh

I understand your point of view

If you disallow investing in anything that may cause misery to others...you have eliminated a lot of investing possibilities....

I am not telling anyone else to make these investments....but this is an investing board....and this is a possible way for some to allocate part of their portfolio to commodities without going into the metals

The exchange of investing ideas was i thought part of the reason we are all here

But i understand not all ideas will be met favorably with all posters....different strokes for different folks

[tyfighter3]

All I know is if I was a Farmer, I would be selling 1/2 of my up coming crop for the fall delivery date and go from there. Most crops are hedged and when the buyers have what they need they quite buying. At $7.00 a bushel, you know they are doing that. Check out the Nov and Jan contracts and see how they are doing, it's a good indicator. JMO

[tyfighter3]

The near by prices are for what is left over from last years growing season and should be strong for a few more months but you have to keep a eye out about this years growing season and what will be coming on the Market in the fall. If they have a good growing season this year, don't get caught when the new crop comes on line. JMO

[Aman A.K.A. Ahamburger]

Ty, you sure talk like a farmer..

[tyfighter3]

Grew up on a Farm, the best years of my life.

[tyfighter3]

Grains are in short supply but you may see a flight to quality, meaning the Dollar short term.

[Aman A.K.A. Ahamburger]

Grew up on a Farm, the best years of my life.

I hear that!!

I agree with your assessment of watch out for next fall..

[nicomachus]

I have always thought that if there is any truth to the slogans about America being great, it is because our land is one of the few with the potential to do just about anything in abundance. We have plenty of land for farming, plenty of sources of water, spots for hunting and fishing, spots for international tourists, plenty of natural resources and minerals... how many other countries have all of this?

It saddens me to watch us squander it on urban sprawl and imported iPods.

Bring back the farms.

[Aman A.K.A. Ahamburger]

The farms are alive and well!!

They need more workers, that is the problem. There needs to be MONEY in farming so that the young lads that want to stay on the farm, could. Without urban sprawl and ipods it would be hard to have the population that we have. This also generates money. We need to find a way to balance it out. It think it's through education. People need to understand that food HAS to cost more. There are all you can eat chicken wing places out there, $15.99. People eat 40 chicken wings, or 20 chickens worth of wings. These chickens are subsidies by the govt. People turn around and complain about taxes. Taxes so you can eat cheap chicken wings.. Interesting idea...

If kids stayed on the farm there would be a pay increase in the cites, less urban sprawl. Bigger small towns. You can see for an example what's happening in China. WE are migrating inland because WE want to be close to our families. Pay is going up on the coast. Business is following. The reason that people moved there in the first place however was because of farming. Inflation made it so that producing every single crop to max potential was a top priority (aside from acts of God) They have had to raise wages so they can pull this off.

My proposal would be this. If it were possible to drop almost all subsidies on crops, and save an amount on taxes. So that farming would be profitable and help rebuild the heart of America, would you be willing to pay something in the area of 20% more for food; if the savings on tax would make it so the actual cost was 5-10%?

[tyfighter3]

Another reason to buy Farmland so you could help the younger generation to stay on the farms they where raised on. Plus it's another way to make money on your investment.

[Deleted]

Commentary: Drill oil, plant crops, and avoid gold in March

By Jim Lowell, MarketWatch
NEWTON, Mass. (MarketWatch) — In a matter of one month, the oil markets have moved from peak Egypt crisis levels, to pre-Egypt calms, to back above peak Egypt qualms.

I have often written about oil as the gauge of the recovery’s overall financial engine and, more recently, about how oil’s price gauges the ongoing, escalating destabilization in the sand lot. In March, the ides of oil prices are unlikely to play nice with our markets’ priced-in pre-crisis assumptions of the pace of recovery and the prospects for it.

Even absent Middle East turmoil, I was betting oil would push past $100 per a barrel as soon as summer starts. That view is still based on my overall longer-term bid for recovery being the most probable outcome for domestic, foreign and emerging economies and markets.



More recently, countermanding that view, gold prices have been given a lift due to the increasing rifts. Treasurys have benefitted. The U.S. dollar — you know, the currency headlines love to suggest will eventually become worthless — has bested the performances of other currencies on the world’s tempestuous stage.

The broader markets haven’t fared much worse — though they’ve been subject to more fits and starts. So, when I look to my seasonality scripts to map out a sense of where the market might head based on where it has gone in the past (as long-time readers know I am wont to do in this column), I am framing their historicity within the context of present day volatility.

Doing so leads me to cast the current risk of contagion in a decidedly different light than my charts could portray; at worst, we may be moving from the last blowup in the region that led to Americans being held hostage, an oil-driven economy, and a one-term president, to the potential of America and the global economy being held hostage by the commodity that grounds the current Islamic hegemony. As a result, I’m going to recommend the inverse of what the charts suggest and, simply put, drill oil.

Before I disclose my picks and pans, I know that as oil prices rise, so does a silent tax on the recovery’s pace. The markets’ bid for recovery could fall into a growth tax lurch even absent growth.

The hope is that the unrest won’t be long-lived, and neither will its levee. As I said last month, I’m less sanguine than those who are hopeful about what’s going on in the oil patch. Hope is a difficult belief to uphold in this region.

My job is to look through emotional clouds of unknowing and find the buildable bedrock beyond; today’s rubble is tomorrow’s brick and mortar. But today, I think that tomorrow is more than a stone’s throw away.



That doesn’t mean there aren’t trading opportunities — there are. Oil isn’t going to dissipate in value to those in control of the sands. The commodity trade isn’t going to diminish in appetite or aperture in the emerging markets. People who taste freedom’s more welcoming fare are even as I write, willing to take to the squares and die for the hope of it. That is patently tragic and profoundly hopeful. And I’m hopeful that our government is working on ways to play a sustaining role in the trajectory of the right for all to be free.

With oil hardly free, it’s a justifiable focus of the markets and for me. It’s smart to consider its tactical role in a trader’s portfolio; a 12% overall allocation, or 2% in each position below (being mindful of your overall portfolio’s weighting in oil-related positions).

There are many ways to play oil’s vicissitudes. I like owning it directly with a tripartite “pairing” of the United States Oil /quotes/comstock/13*!uso/quotes/nls/uso (USO 41.18, +0.70, +1.73%) ETF (which tracks the spot price of West Texas Sweet), the Untied States 12 Month Oil /quotes/comstock/13*!usl/quotes/nls/usl (USL 47.05, +0.55, +1.18%) (the average price of the forward 12 month oil-futures contracts), and my Levis Strauss approach, which lets us profit from selling the picks and axes to the miners regardless of whether or not they find Black Gold in them thar hills; no-load Fidelity Energy Services /quotes/comstock/10r!fsesx (FSESX 84.19, -1.68, -1.96%) , top picks are Schlumberger Ltd. /quotes/comstock/13*!slb/quotes/nls/slb (SLB 90.47, -1.03, -1.13%) , Halliburton Co. /quotes/comstock/13*!hal/quotes/nls/hal (HAL 46.32, -0.01, -0.02%) , Baker Hughes Inc. /quotes/comstock/13*!bhi/quotes/nls/bhi (BHI 68.94, -0.27, -0.39%) and National Oilwell Varco Inc. /quotes/comstock/13*!nov/quotes/nls/nov (NOV 78.65, +1.62, +2.10%)

I also like playing oil indirectly through its gauge and bid on recovery. As the emerging consumer class goes increasingly global, demand for soft commodities (cattle, corn, wheat, coffee, sugar, cocoa, soy beans, etc.) these countries want more of but can’t produce enough of, bodes well for pricing power and profit. Here, I like the Market Vectors Agribusiness /quotes/comstock/13*!moo/quotes/nls/moo (MOO 55.47, +0.20, +0.36%) and the Powershares Agriculture /quotes/comstock/13*!dba/quotes/nls/dba (DBA 35.00, +0.38, +1.09%) . Moo provides all the machinery and wherewithal to seed, sow, nurture, harvest and transport such staples and DBA is a basket of them.

In league with such recovery and alternative currency themes, I like the Powershares Currency Harvest /quotes/comstock/13*!dbv/quotes/nls/dbv (DBV 23.79, -0.01, -0.03%) . DBV is basket of G-10 currencies that seeks to capitalize on what I’ll oversimplify as the currency trade: currencies in economies where interest rates are rising tend to rise in value while the inverse is true in rate-cutting economies.

One way I would not play the current volatility is by means of gold; it has had its year in the sun even if it still has sunny days in store. As fundamentals support fear, gold will go up, but oil will likely continue to go up more. As fundamentals point toward a diminishment in fear, gold will likely drop while oil prices will initially drop but then pump higher as recovery’s hopeful pace quickens.


I still like DBA as a soft commodities play. I think prices are heading higher on many of our food crops....and this is one man's opionion on how to make a buck.