A very supportive backdrop for grains
Agricultural commodities are back in the spotlight, with grains leading the charge.
Soybean futures rose to another 34-year high above $11.25 a bushel early this week, and have risen by 68% over the past 12 months.
Wheat, currently at a two-month high, has advanced by 70% in 2007, while corn (a relatively subdued performer of late), which hit historic highs earlier this year, is also beginning to trend upwards.
Demand from China and the rest of the developing world is rising as increasing wealth stokes an appetite for meat – the average Chinese consumer got through 20kg of meat in 1985, compared with more than 50kg now – which in turn requires more grain, says The Economist.
The trend towards biofuels is a further factor. The US, the world’s biggest corn exporter, now uses more of its crop for ethanol than it sells abroad. About 85 million tonnes of corn will have been turned into ethanol this year, up from 15 million in 2000.
Meanwhile, corn stocks, at 7.5 weeks’ consumption, are at a 33-year low, while wheat inventories are at 9.3 weeks’ consumption, a figure not seen since the US Department of Agriculture began publishing global inventory data in 1960, says Sudakshina Unnikrishnan of Barclays Capital. The fundamental backdrop is “very supportive”.
