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A Rising Tide for Agricultural Commodities

Stocks in this article: HSY K MCD KFT SLE SBUX SJM PEP


NEW YORK ( TheStreet) -- Agricultural commodity prices are likely to be on the rise for quite some time, driven by growing demand from emerging global markets, political unrest and an increasingly unpredictable growing environment.

Sugar on the whole is on the uptrend. On Feb. 2, sugar burst through a 30-year high as a storm slammed into Australia -- a big sugar exporter. Sugar futures for March delivery flew past 36 cents a pound and is expected to continue trending higher.

One the one hand, supply-constraining political, economic and climate-related developments will continue to keep prices strong. On the other, fundamental demand for food continues to increase as populations around the world grow bigger and richer -- and not just in the most populous, developing nation of China.


"You've seen caloric intake overall rise in most parts of the world over the last ten, 20 years, and that's a trend that's going to continue," said Jeffrey Christian, managing director and founder of CPM Group, a commodities research and investment firm. "Populations are growing, but financially -- generally speaking -- they're better too, so people can afford more food." Currently India is the biggest consumer of sugar.

Food prices are also being driven by speculators. Coffee is one instance of an agriculture commodity that's been receiving a big inflow of speculative money. "Right now they have a relatively large long position and that could help keep the price up for a while," Christian said.


Looking at grains, Deutsche Bank recently came out with a report titled, "Running Out of Corn," in which analyst Michael Lewis said that he views the physical fundamentals of corn as "extremely tight" -- driven by rising Chinese corn shortages and increasing appetite for U.S. corn from the U.S. ethanol industry.

Overall, the analyst finds that rallies in corn and coffee tend to be shorter in duration than wheat, cocoa, sugar and cotton -- though rallies are typically more powerful in magnitude for sugar and coffee than cotton and corn.

Here's a look at the current views and projections of prices, and supply and demand developments for corn, wheat, sugar, cocoa, orange juice and coffee -- and how recent price increases have impacted the major food companies.

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