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Commodities Headed for Bull Market as U.S. Drought Withers Crops

Bloomberg - Aug 21, 2012

Commodities are poised to enter a bull market led by surging grain futures amid the worst U.S. drought in half a century and on mounting optimism growth in the U.S. and stimulus from China will boost demand.

The Standard & Poor’s GSCI gauge of 24 raw materials rose as much as 1.2 percent to 677.29 in London, the highest since May 3, and was up 1.2 percent at 2:14 p.m. in London. The gauge has jumped 21 percent from this year’s lowest close of 559 on June 21. A gain of more than 20 percent is the common definition of a bull market.

The worst U.S. drought in a half century sent soybeans to an all-time high of $17.1275 a bushel today, while corn reached a record $8.49 a bushel on Aug. 10 on the Chicago Board of Trade. The Department of Agriculture has slashed its corn harvest forecast by 27 percent since June, after declaring more than half of U.S. counties as disaster areas while drought conditions stretched from California to New York.

“The grains have been the strongest performing subsector in commodities the past few months, and that has purely been driven by supply-side considerations and the U.S. drought in particular,” said Sudakshina Unnikrishnan, a London-based analyst at Barclays Plc.

Read Full Article from Bloomberg

- Posted: 2012-08-21 16:43:57


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