31st August 2012
Learn The Edge co-founder Erkut Ozer seems to be getting quite a following on CNBC. Not only has he established himself as a regular television analyst, and a featured columnist, but his latest video is now featured as one of the top videos on the CNBC.com site. Great to see him alongside the likes of the French Finance Minister – keep up the good work Erkut!
Erkut’s video can be seen by clicking here
Erkut Ozer, CEO of Global Trading Enterprises and
co-founder of Learn The Edge has been quoted on a CNBC article about the soft
commodities complex (which can be read below). If you haven't already
seen it, the video of his CNBC appearance can be seen here.
Soft commodities have been on something of a rollercoaster over the past 6 months, with wheat and - to a lesser extent - corn bearing the brunt. The market expects strong forecasts this year with corn plantings predicted to reach their highest level since 1944.
 |
AP |
But as we wave goodbye to a volatile first quarter, analysts believe soybeans are now a good bet thanks to strong demand in Asia.
“China is one of the biggest players. They have approximately 400 million hogs compared to the USA which has 64 million. These need to be fed and they feed them with soybeans. So the soybean market is going to be a big driver in the medium to long term," Erkut Ozer, CEO of Global Trading Enterprises told CNBC.
Luke Chandler, Global Head, Agri Commodity Markets Research at Rabobank, also sees strong potential in soybeans.
In first quarter of 2012 soybeans rose more than 13 percent on a continuation chart, marking the biggest quarterly gain in a year.
"In our 2012 outlook that we released in December, soybean meal and soybeans was our top pick and that’s really played out in this first quarter," Chandler said. "We were really factoring in the linear weather conditions and the downward productions for South American production and that’s certainly come to fruition."
Chandler predicts that the USDA and other government agencies will continue to downgrade production expectations in South America, thus placing a greater demand on the U.S. farmer to plant more soybeans.
He suspects that South America’s crop loss has yet to be fully priced in to the market.
"As a result we’ve seen soybeans rallying really hard over corn over the past few weeks to capture as much acreage as they can for this season’s crop because otherwise we’re going to see a very tight global soybean balance sheet for 2012 and ‘13," Chandler said.
Ozer believes we will now see a move towards different trends in growing, as farmers adapt to changes in population and climate.
“We’re seeing yields in the crops that we’ve never seen before and that’s down to genetically modified crops. Europe don’t import genetically modified crops, so essentially we’ve got Europe providing for itself,” he said.
“The crops aren’t as highly yielded and of the same quality, so we’ve got a disparity there. Eventually the euro zone will probably look to start introducing some of the genetically modified crops,” Ozer added.
He believes investors should take a "wait and see" approach when it comes to investing in soybeans.
“Everyone’s been liquidating, especially in corn,” he said.
“The soybeans have been following a little, but it’s still very high. We’re also expecting the largest ending stocks for a while in wheat. Maybe just wait a little while and buy on the dips,” said Ozer.
Friday 30 March 2012 saw the release of the USDA Prospective
Planting Figures. With the announcement
of this highly influential figure, speculators would now have the opportunity
to learn the decision to be taken with farmers and their acreage, importantly
seeing the resulting movement in the grains market.
The USDA figures saw
Soybeans reached a six month high off the back of this
news. Where corn seemed to be dominating
acreage, soybeans acreage seemed to pay the price on the other hand. Soybeans acreage is set to be pegged back to
73.9 million acres, which was down by 1% on 2011’s figure. The overwhelming
move towards corn planting should not mask the profit prospects from the
soybean crop – however, corn’s prospects are considerably higher[2].
Wheat’s acreage is also up by 3% on last year, to 55.9
million acres. Broken down – winter wheat
is in fact up by 3% from 2011, yet 1% down from the last estimate. Hard red winter wheat constitutes 29.9
million acres whilst soft red winter wheat, 8.4 million acres and white winter wheat
is 3.5 million acres. Hard red spring wheat
is down 3% from the previous year to 12 million acres, whilst Durum wheat is at
2.22 million acres for this year, up 62% on 2011.
When the US Markets opened, whilst the May’12 Globex soybeans
futures contract reflected the bullish fundamentals on the back of the USDA
figures, by reaching highs of $14.16 – up 58’6 cents (at the time of writing),
the seemingly bearish corn figures did not follow its equivalent fundamentals
accordingly. May’12 Globex corn futures
moved limit up upon the start of trading by 40’0 cents reaching $6.44, even
when taking into account the bearish prospective planting news. The quarterly stocks in corn for 1st March 2012 – 6.01
billion bushels - being down 8% on last years figure, may have offset the increased
prospective planting of the corn crop in the immediate term, with the tighter
corn stocks having a bullish effect on the market.
The weak dollar also entices increased export demand of these
dollar-denominated grains. The dollar
had fallen by ‘0.5% as of 08:30 GMT’ this morning[3]. Soybeans are likely to have felt more upward
pressure given the increased demand for soybeans from
Bibliography
[1] http://www.bloomberg.com/news/2012-03-30/u-s-corn-acres-seen-jumping-to-75-year-high-on-profit-outlook.html
- U.S. Corn Acres Seen Jumping to 75-Year High on Profit Outlook
, Bloomberg
[2] ibid
[3] http://www.agrimoney.com/marketreport/morning-markets-crops-edge-higher-as-long-awaited-data-loom--1544.html,
Morning markets: crops edge higher as long-awaited data loom, Agrimoney
[4] Ibid.
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