2007 Year for AG

[DB008]

Hi All,
Just been doing a little bit or research and alot of analysts have been predicting that most AG commodities have under performed compared to metals in general and that 2007 is going to be a bumper year for AG.
CORN and SOYBEANS in particular have exploded in the last few months and all indications say that because of the drought and ethanol demand, corn will reach 25 year new highs. FCOJ has also had a bit of a run in the last few weeks because of the weird weather patterns in the US, now around the $2.07 mark l think.
I know that Waynel also does a bit of trading on commodities. Anyone else do commodities??
Views on this everyone???

 

[BREND]

Base metals for myself

 

[Bush Trader]

DB008

I trade the physical soft commodities for a living (wheat, corn, barley, cattle etc). The paper job is a lot more difficult unless you’re a grower or end user, in other word its more speculative than stocks and currency has a greater effect on the end result. Soft Commodities are generally more logical than other than other commodities, i.e. hedge funds may not have discovered them yet? If you are looking for an opinion on how strong commodities will be for 2007. I can only suggest the following in terms of Australia.

Wool, Sheep numbers down dramatically 30-40%, demand steady, clip will be finer due to drought conditions, therefore economics say price will strengthen.

Cattle lower numbers, greatly reduced breeding herd in NSW & VIC. Store cattle will be at historically short supply once the season breaks and a re-stocker market forms. As far as feed lotters are concerned grain supply will remain tight until next harvest, and feed on quality cattle are also going to be short, combine this with the possibility of a strengthening dollar, and further rise in interest rates and the US re-entering the Asian markets, it could be a year of very few smiles and reduced profit margins. Currently I am long Feeder Cattle, and unfortunately short grass, excuse the pun.

Grain, with lower livestock numbers, more hectares of winter crop will be planted. Planting area will be dictated ultimately by the timeliness of break rainfall and the generosity and empathy of the banking sector. Generally wheat is the preferred flavour. Smarter operators have taken advantage of derivatives to put a floor in next years crop value. Something to watch here is when the feed and milling grain prices converge in price on a rising curve, this often means that you are nearing a top. I suggest that if you want to trade these things then you need to get you head around deciles. For example the corn price is in the 99th decile i.e. it has only spent 1% of its time at a higher value. (I know! The same comments were made about copper, zinc & oil etc.)

Corn, Cotton and Rice are interesting beasts at the moment. Watch carefully water storages, allocations, and government legislation to get an idea of planting area next year, all these puppies need irrigation, very little dryland stuff grown especially the last few years. Even though corn is used in ethanol production it can be substituted for wheat or sorghum, both of with are grown in large quantities on dryland production.

Good Luck with it

It will require more detailed research as there is less of it done than with other commodities. Last recommendation is that there is an old rule of thumb in the bush “Take what ever ABARE says and halve it, and what they think will be good will ultimately go bad”


This is why I trade shares

Happy trading