Crops Post Longest Rally in Four Years on Tighter Supplies

Commodities Check: Should Investors Be Optimistic?
  • Agriculture, livestock ETFs attract $14.8 million in past week
  • Tyson reaches record; Monsanto caps best rally since 2012

The stepchild of the commodities world is finally getting investors’ attention.

Agriculture prices are heading for the longest rally in four years, as adverse weather and rising demand finally help to reduce the outlook for global gluts of food supplies. Sugar and soybeans reached their 2016 highs on Friday. Corn and wheat posted weekly gains. Monsanto Co. had the biggest weekly rally since 2012, and Tyson Foods Inc. touched an all-time high.

While copper, gold and oil have benefited from rebound in the past month that prompted Australia & New Zealand Banking Group Ltd. on Friday to say that the worst was likely over for commodities, farm goods had lagged behind. That changed this week as the U.S. government cut its outlook for global wheat supplies, while dryness across global growing regions threatens sugar and cocoa crops. Investors poured almost $14.8 million into exchange-traded funds tracking agriculture and livestock over the past week, data compiled by Bloomberg show.

“A lot of equity markets around the world have increased, and that is bringing insight into the idea that economies are doing better around the world,” James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview. “The middle class, globally is still doing quite well and it grows everyday, and the need for cocoa, sugar, coffee is starting to mirror that.”

The Bloomberg Agriculture Index of eight farm products rose 1 percent to 53.2064 on Friday. The measure capped eight straight sessions of gains, the longest steak since February 2012. The gauge is up 4.2 percent in March, snapping four straight months of losses.

Shares of agriculture-related companies rose. CF Industries Holdings Inc., the largest U.S. producer of nitrogen fertilizer, on Friday climbed as much as 8.9 percent, the most since August. Monsanto, the world’s largest seed producer, jumped 5.9 percent this week, the biggest gain since November 2012. Tyson, the largest U.S. meat processor, reached the highest since data begins in 1984.

Wheat futures in Chicago, which fell on Friday, still had the biggest weekly gain since October. World inventories will be 237.6 million metric tons, down from 238.9 million tons estimated in February, the U.S. Department of Agriculture said Wednesday in Washington. The agency reduced harvest expectations for India and Australia.

Raw sugar traded in New York posted a third straight weekly gain. The International Sugar Organization is forecasting that production will fall short of demand amid weather-driven crop concerns. Dryness in Thailand, the world’s second-largest exporter, “has become fairly widespread across the cane belt,” Gaithersburg, Maryland-based MDA Weather Services said Thursday in a report.

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