Historically high grain and oilseed prices look like they're here to stay through the US planting season as export business remains strong and inflation-wary investors keep pouring money into commodities. "We certainly have a positive grain fundamental situation until we get into the '08 growing season," said Rich Feltes, senior vice president and director of MF Global Research.
Commodities in general have jumped to record highs in 2008, and corn, wheat and soyabean prices on the Chicago Board of Trade, the world's benchmark for price discovery, are double to triple what they were a year ago.
Factors driving grains prices higher include a rising world population, a weakening dollar, questions about climate change and its impact on crop production and a push for biofuels as an alternative to petroleum-based fuel to run cars.
Inclement weather last year also pushed grain prices higher by shrinking world output. It's no secret that the fundamental outlook is attracting hot Wall Street capital into commodities. US grain traders estimated that index funds, which buy and hold positions for months or even years, were set to invest $5 billion to $10 billion in commodities just during the month of March.
The Reuters-Jefferies CRB Index of 19 commodity futures hit a record-high on Monday for the 12th straight session, up 12 percent from the end of January. "The overall backdrop for investment in commodities continues to be quite strong," Feltes said. "There seems to be continued fund diversification into commodities, the dollar trend is still lower, we've got strong spending in Asia."