Buying agricultural commodities

[GreatPig]

At the end of this article about Jim Rogers, he talks about buying agricultural commodities (as opposed to metals).

Other than with futures (which I gather are fairly short-term), how does one go about buy agricultural commodities for the longer term?

This means things like wheat, cotton, sugar, etc.

Cheers,
GP

 

[wayneL]

At the end of this article about Jim Rogers, he talks about buying agricultural commodities (as opposed to metals).

Other than with futures (which I gather are fairly short-term), how does one go about buy agricultural commodities for the longer term?

This means things like wheat, cotton, sugar, etc.

Cheers,
GP

Hey GP

Unless you want to build a very big shed, futures are the way to go. There are stocks that deal in these commodities of course, but these expose you to other factores apart from the commodity price itself.

Futures need not be short term, there are long dated contracts available. Conversly, when expiry approaches, you can just roll them to another expiry.

 

[GreatPig]

Thanks, Wayne.

Think I'll skip on the big shed , but I really need to start reading up on futures again, and stock derivative products too. I did study futures quite a bit many years ago, but didn't have enough money then to do anything about it.

Cheers,
GP

 

[RichKid]

At the end of this article about Jim Rogers, he talks about buying agricultural commodities (as opposed to metals).

Other than with futures (which I gather are fairly short-term), how does one go about buy agricultural commodities for the longer term?

This means things like wheat, cotton, sugar, etc.

Cheers,
GP

I've been thinking along the same lines, see the ASX site for a limited number of agricultural futures and options (mainly directed at producers- illiquid for us?). Not sure which futures are the most liquid and most accessible for mug retail punters, I'd prefer to trade using a local account with local $$$'s. Maybe CFD's?

So which soft commodities are the most promising atm? I've been meaning to get some historical charts to see what the cyclical movements are long term. In metals for example, they say that Zinc leaves its run to the last. Wonder if soft commodities take over when metals correct? Cotton price seemed to be picking up. Time for some charts I say!

Read Stanley Kroll's 'Futures Trading Strategy' for some simple observations on the more popular markets.

 

[wayneL]

Time for some charts I say!

Commodities Charts (spot month) here This is on my site in a more convenient format (IMO)

Forward months available from FutureSource

Option IV's Here

Cheers

 

[michael_selway]

At the end of this article about Jim Rogers, he talks about buying agricultural commodities (as opposed to metals).

Other than with futures (which I gather are fairly short-term), how does one go about buy agricultural commodities for the longer term?

This means things like wheat, cotton, sugar, etc.

Cheers,
GP

Wheat - AWB, ABB, GNC
Cotton - QCH, NAM
Sugar - CSR

can anyoen add to that list?

thx

MS

http://www.washingtonpost.com/wp-dyn/content/article/2006/05/19/AR2006051900126.html

 

[clowboy]

I went to a seminar the other night and it was metioned that Barclay's have a long soft commodites managed fund (futures) but as of yet I have had trouble locating it or anything about it.

Anyone know of it or anything similar?

Thanx

 

[wayneL]

Commodities Charts (spot month) here This is on my site in a more convenient format (IMO)

Forward months available from FutureSource

Option IV's Here

Cheers

I also have historical continuous charts, some going back to 1979. Just ask for any you want posted

 

[RichKid]

I also have historical continuous charts, some going back to 1979. Just ask for any you want posted

Thanks Wayne, how about these three:
Cotton, Wheat and Sugar (following on from previous posts) seem to be best represented on the ASX. I wonder if any co's are directly exposed to Soy Beans or Orange Juice futures?

The problem as I see it for me is which instrument to use since I don't trade futures. Do you plan to open a futures trdg ac GP? Otherwise it'll probably be via a proxy such as an ASX listed stock, such as those mentioned by Michael. Once we know which markets and instruments to target we can research it to death and come up with a strategy.

If you could post all three on one chart Wayne that'll be great (ie to see relative performance) otherwise anyway you can. I plan to compare the commodity prices to the stocks to see if there's any relationship. Not sure if they run in a similar manner to oil and gold stocks when poo and pog are going up.

btw Michael, sugar prices appear to affect Coca Cola but I don't think it's such a big element in the stock price.

The following came up on ASX via a basic co info search:

Sugar- MSF, CSR
Wheat/Grain- TAN, AWB, ABB
Cotton- NAM, QCH, TAN, AFF

 

[wayneL]

Ok these are continuous spliced charts i.e. they are actual prices traded without back adjusting.

Nick, if you read this, is this what we want to be looking at? Not backadjusted?

MONTHLY BARS

 

[RichKid]

Thanks for the charts Wayne, these all seem to have just moved away from their bases, some retests of those support areas seem to be occuring, most are in the low to mid range areas of the price cycles. I wish there were longer term charts going back 40 yrs or so but I'm not sure if the different circumstances in those early years would affect things. Eitherway it shows that most of the commodities seem to run together as the metails started their runs a few years ago too.

That sugar chart (retesting breakout from base/triangle, w4 correction?) looks particularly sweet!

 

[RichKid]

At the end of this article about Jim Rogers, he talks about buying agricultural commodities (as opposed to metals).

Other than with futures (which I gather are fairly short-term), how does one go about buy agricultural commodities for the longer term?

This means things like wheat, cotton, sugar, etc.

Cheers,
GP

Thanks for the article GP, good to get in ahead of future euphoria with these things. Maybe ride a few wave 3's if we can.

 

[phoenixrising]

Interesting that jim says no worldwide drought atm. I guess Oz doesn't qualify as worldwide. 62% of NSW is n drought for the 4th yr running inc most of the commodity growing areas.

The thing with the likes of AWB, GNC,ABB is the local issues affecting the stock values as opposed to say wheat being traded on CBOT as futures.
From Chicago point of view as long as most growing countries are ok (US midwest, Canada, Oz overall, parts of Europe) and there are markets to sell to, then the market will move along. Places like France don't count as they have 30 acre heavily subsidised wheat fields that don't even qualify as hobby farms here, hindering free trade to our much more efficient farms.

Grain growing here is much more deversified now than 20 or 30 yrs ago. The old sheep and wheat farm is now sheep and grain farm, which may grow barley,oats, sorghum, chickpeas, triticale and a host of others.

My point is AWB mostly markets wheat, but may cross to other grains as could ABB (barley board) and GNC (grain handling) also.
To get purity of the commodity, trade in futures is the way to go and dilute local issues imho

Cheers

 

[mit]

cmc has commodity CFDs as well. It has most of the usual suspects including Pork Bellies which always cracks me up and makes me think of American Sit-Coms.

MIT

 

[RichKid]

Bingo!! CSR is said to be correlated to a sugar contract (NY #11, see Wayne's chart above, looks like the same one), I was watching it as a normal share trade for exposure to ethanol bandwagon etc but now will look even more closely as a proxy for sugar futures. I need to compare charts first to make sure Amro's has got it right. The issue here is that other parts of the business may slow so much that the charts go out of sync even if the sugar futures prices rise. Buy in gloom sell in doom? Thanks to Noirua for mentioning this article in the CSR thread:

CSR's prospects hit
Anthony Marx

June 19, 2006 http://thecouriermail.news.com.au/story/0,20797,19509912-3122,00.html

LEADING sugar company CSR could be hit by a 10.6 per cent slump in net profit in the new financial year after a Queensland canegrowing region suffered an outbreak of fungal disease this month.

The sugarcane "smut" can slash yields by more than 30 per cent but, worse yet, may also lead to mill contamination and lost time of 12 to 18 months in re-planting crops, says brokerage company ABN Amro Morgans.

Sugar farmers could face losses in the hundreds of millions of dollars from the airborne disease, which is common overseas but had never before struck on Australia's east coast.

However, the discovery of the fungus in a small and remote farm area near Bundaberg means that CSR's primary growing catchments in the Herbert and Burdekin regions might escape unscathed, the broker's client note said.

Queensland's Department of Primary Industries quickly quarantined the 100ha farm in Childers when the fungus was discovered but it might still travel north and could have "a material impact on raw sugar yields in the 2006 and 2007 cropping seasons", the report said.

"While we continue to see strength from CSR's diversified earning streams, we remain watchful of any further spread of smut disease and its potential to impact future earnings, given sugar represents 42 per cent of fiscal year 2007 EBIT (earnings before interest and tax)."

The Childers' region annual sugar cane crush, planned to start today, has been halted while investigations continue.

The fungus, which stunts infected plants and prevents the possibility of regrowth, could lead to a decrease in CSR's cane tonnage from 15 million tonnes to 10 millions tonnes.

As a result, sugar EBIT would tumble 22 per cent, from $196.6 million to $153.3 million.

Despite the dangers facing the $2 billion industry, ABN Amro Morgans said it remained "cautiously optimistic" about the chances of containing the disease and maintained its "buy" recommendation for the stock.

"Any reaction of global sugar prices to this outbreak may in fact lead to a rally in the CSR share price given its historical correlation with the NY No 11 raw sugar future, irrespective of the potential impact on CSR's cane yield," the report said.

Record high prices for sugar and aluminium helped CSR boost earnings last year despite a housing downturn which hit the firm's building products division.

Even with an increase in sugar diverted for ethanol production, CSR in May reported a 4.4 per cent fall in net profit to $305 million for the year to March 31 because of a series of costly one-off expenses.

Pre-tax earnings jumped 16.2 per cent to $416.8 million, with revenue from sugar shooting up 42.4 per cent to $1.36 billion.

CSR forecast pre-tax earnings growth of about 10 per cent for the current year, with sugar prices tipped to exceed $400 per tonne, up from $316 per tonne. That should compensate for a likely earnings slowdown in building products, aluminium and property returns.

 

[RichKid]

Here are the relevant charts for sugar v CSR, I'm not sure if I've got the correct contract but it doesn't really matter as we just need a rough idea, I wish I had more data for the earlier years for sugar but egoli pro charts doesn't have it in the free version, eitherway this should be fine, it appears the relationship is only close enough for medium to long term trading or investing rather than day to day trading as some periods are less correlated than others.

I think I will just trade the EW patterns in CSR with the exposure to the sugar contract in mind.

btw, can anyone explain that big drop in sugar in late 2003? Or is it just faulty data?

 

[RichKid]

.......it appears the relationship is only close enough for medium to long term trading or investing rather than day to day trading as some periods are less correlated than others.........

I may be wrong on that, here's the daily comparison for the recent period.