Soft Commodities Recap: Cotton, Wheat, Corn, and Sugar Prices February

Here is a recap of price flucutations, and the market news for select softs, February 2012. Courtesy of analysts at GEOnomic Investing. 

Cotton

Cotton futures saw a modest retreat this month, they started trading at $93.40 cents per lb on the 1st, and closed at $90.44 on February 29th.  Prices saw their steepest price swing on the 7th, as futures tumbled the most in two months on signs that demand in China, the world’s biggest consumer, was retreating. Cotton futures were  able to gain back some of their losses, mid-month, following a USDA report showed Global cotton output will fall 3.9 percent to 118.5 million bales in the year beginning Aug. 1 from an estimated 123.3 million in the current season.  The USDA also added that  flobal consumption will increase to 114.5 million bales from 109.7 million. On the last two trading days of the month, prices saw a steep decline, which analysts attributed to investor liquidation, and a firming greenback.

Wheat

Wheat started the month off at $6.7450 a bushel and ended at $6.7150 a bushel; however, this modest price decline masks a volatile month of trading.  Wheat prices saw some steep drops, then retreats,  in response to changes in supply/demand- both data and speculation.  Dry weather in the U.S. and cold weather in Europe crimped supply expectations on a few occasions, and contributed to some price rises.  At the same time, changing sentiment over weather caused wheat futures to stage  a quick corrections.  Adding a little more downside was this months USDA report that showed U.S. wheat production should  rise to 2.165 billion bushels, up from a five-year low of 1.999 billion last year.  The USDA also added that rising production should  boost domestic inventories to 957 million bushels.

Corn

Corn witnessed some volatile price swings, this month, responding in a knee-jerk fashion to changing supply and demand projections. Adding downside was speculation that   the U.S., the world’s biggest shipper of the grain, will increase production 15 percent to a record, according to a report by the  United States Department of Agriculture. Yields may average 164 bushels an acre, the USDA added; however, about 4.95 billion bushels will be used to make ethanol, the fewest in three years.  Shrinking demand for ethanol may result in stockpiles of corn in the U.S. to double to 1.62 billion bushels in the 2012-13 marketing year from 801 million bushels in the prior year.  At the beginning of the month corn prices rose, and then reversed on speculation that the USDA would lower its estimate for global stockpiles, however, as the month went on and the USDA released its evidence that stockpiles and production are set to rise,  corn prices corrected.  In conclusion, after  starting the  month at $6.42 a bushel, corn prices closed finished off the month modestly up, at  $6.52 a bushel.

Sugar

Raw sugar prices slowly trended up in February,  sugar started the month at  $0.23 a pound, and sugar prices closed the month at $0.25 a pound. The upward trend was gradual, there was really only one significant blip, which occurred in the third-week of the month in concert with climbing crude.  Higher crude oil prices can spike demand for sugar  as sugar cane can be used in the  production of ethanol. A few interesting data points were released about sugar this month, but none of them had a huge influence on prices. At the beginning of the month, the NYSE Liffe released data that showed Money managers more than doubled their net-long positions, or bets on higher prices, on white sugar futures and options. Net-long positions totaled 9,034 futures and options as of Feb. 7, up from 4,128 contracts a week earlier.  At the end of the month,  F.O. Licht  announced that raw sugar may slump to less than 20 cents a pound by year-end as global supply exceeds demand for a second season in 2012-2013. On interesting thing to note about the sugar market, this month, is the level of contango, or the premium paid to purchase sugar in a future month compared to current month.  This premium, when comparing immediate delivery to to March delivery was nearly 28%.