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Commodities Rise to 2014 High as Goldman Maintains Bearish View

A coffee plant, with some brown leaves caused by a recent drought, stands at the Tijuco Preto estate in the state of Minas Gerais near Serra Negra, Brazil. Photographer: Paulo Fridman/Bloomberg
A coffee plant, with some brown leaves caused by a recent drought, stands at the Tijuco Preto estate in the state of Minas Gerais near Serra Negra, Brazil. Photographer: Paulo Fridman/Bloomberg

Feb. 13 (Bloomberg) -- Commodities climbed to the highest since December as extreme weather fueled supply concerns for crops and energy at a time of rising imports by China. Goldman Sachs Group Inc. says this year’s gains will be short-lived.

The Standard & Poor’s GSCI Spot Index of 24 commodities gained 0.2 percent to settle at 636.22 yesterday, after touching 639.93, the highest since Dec. 30. Coffee led gains, and cocoa reached the highest since 2011. Gold capped the longest rally since June 2012.

The driest January since 1954 seared crops in Brazil, the top sugar and coffee grower, while freezing weather across the U.S. damaged winter wheat and cut energy stockpiles as heating demand rose. China’s imports surged 10 percent in January, driven by crude oil, iron ore and record shipments of copper, customs data show. Goldman maintained its “underweight’ 12-month recommendation on commodities, as raw materials from gold to copper will see more impact from turmoil in emerging markets, the bank said yesterday.

‘‘A drought in Brazil gives rise to supply concerns,’’ Adrian Day, the president of Adrian Day Asset Management in Annapolis, Maryland, who oversees about $150 million, said in a telephone interview. ‘‘It’s logical that sugar and coffee are leading the pack. The Chinese data is more bullish for the world economy.’’

The GSCI gauge has rebounded this year after last year capping the first annual loss since 2008. China’s economy, the second-largest, may expand 7.6 percent this year, Helen Zhu, chief China strategist at Goldman Sachs, said yesterday. That’s faster than the 7.4 percent median estimate of economists surveyed by Bloomberg.

Holdings across commodities tracked by the GSCI index rose for a seventh straight session, to the highest since November.

Crude Supplies

West Texas Intermediate crude yesterday climbed to the highest since Oct. 18 after inventories at Cushing, Oklahoma, the delivery point for the futures, shrank by 2.67 million barrels last week. Natural gas surged as much as 4.2 percent on speculation that a blast of cold air drove an unusually large U.S. stockpile decline last week.

Raw-sugar futures jumped as much as 3.1 percent on ICE Futures U.S. in New York, while arabica coffee futures surged as much as 3.1 percent.

Gold futures for April delivery gained as much as 0.5 percent yesterday to $1,296.40, the highest since Nov. 8, as speculation that U.S. stimulus will continue boosted the appeal of alternative assets. Federal Reserve Chairman Janet Yellen said this week that while the recovery in the labor market is ‘‘far from complete,” stimulus would be cut in “measured steps.”

Goldman, Citi

This year’s rebound may be short-lived as banks led by Goldman Sachs and Citigroup Inc. say commodities are heading for losses in 2014. Raw materials from copper and corn to sugar and coffee will have supply surpluses this year after a decade-long bull market spurred producers to build new mines, drill more wells and expand crop planting.

The S&P GSCI Enhanced Commodity Index, Goldman’s preferred measure, will drop 4.3 percent in the next 12 months, analysts led by Jeffrey Currie said in a report yesterday. Declines will be led by a 14 percent drop for precious metals, while agriculture products will fall 9 percent, the bank said.

To contact the reporter on this story: Luzi Ann Javier in New York at ljavier@bloomberg.net

To contact the editor responsible for this story: Millie Munshi at mmunshi@bloomberg.net

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