The Dow Jones-UBS Sugar Subindex Total ReturnSM is a sub-index of the Dow Jones-UBS Commodity Index Total ReturnSM and is intended to reflect the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index as well as the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The Dow Jones-UBS Sugar Subindex Total ReturnSM is a single-commodity sub-index currently consisting of one futures contract on the commodity of sugar, which is included in the Dow Jones-UBS Commodity Index Total ReturnSM.
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The only kind of high prices most find acceptable are for stocks and real estate. Jim Rogers makes the case that high commodity prices are absolutely necessary to ensure continued supplies. "Are the politicians going to work 12 hour days in the field for nothing?"
Companies worried about rising commodity prices are stockpiling everything from rubber tires to fabric purchases, but are they insulating themselves from sticker shock or just making the problem worse? (see also)
March sugar futures rise 5.1% to a 30 year high as Tropical cyclone Yasi threatens Australian production, which accounts for 7% of world exports. Earlier flooding has already reduced Australia's sugar crop to the lowest level in nearly 20 years. Sugar ETF: SGG +4.2%.
Rio Tinto (RIO) and Xstrata (XSRAF.PK) shut coal mines and crop losses are likely as the first category 5 cyclone to hit Queensland since 1918 prepares to make landfall. A cat 4 cyclone in 2006 devastated Australia's banana and sugar (SGG) crops.
"Go long agriculture and water and go to the beach," says BlackRock CEO Larry Fink, "put those investments in the bottom drawer for 10 years." Noting Israel's recent gas discovery, Fink believes energy will be less profitable. "They're finding lots of ways to find new energy." PHO +0.9%.
Worried about increasing prices, short supplies, and political unrest, developing countries are stockpiling staples. Wheat touches a new 29 month high after Algeria and Saudi Arabia announce extraordinary purchases. Indonesia, which usually buys rice 200K tons at a time, tenders for 800K. JJA +0.4%.
Unconcerned that China and India are tightening monetary policy, Jim Rogers sees commodities as a win/win investment. “If the world economy gets better, commodities are going to make a fortune. If the world economy does not get better, commodities are the place to be because they are going to print more money."
The ECB warns again, noting recent purchasing managers reports show higher input prices are being passed along to consumers. It forecasts inflation will worsen in the coming months before moderating towards the end of the year. The euro jumps 100 pips before falling back slightly to $1.3490.
Macroman notes that Shanghai has fallen below its 200 day moving average and considers the worrying implications for commodities, whose fortunes have tracked Chinese shares. A divergence in performance, starting in mid-November, has widened significantly.
An agriculture company 34% owned by an affiliate of George Soros files for a $400M IPO. Adecoagro (symbol to be: AGRO), one of the largest owners of farmland in South America, plans to use the proceeds to build a sugar and ethanol mill, as well as for acquisitions.
With the price of nearly every commodity on the planet putting in astonishing runs and sitting at or near multi-year or all-time highs, Deloitte Touche Tohmatsu brandishes extrapolation skills, arguing food will become much more expensive over the next decade.
The bounce back in food prices from the GFC is complete as the FAO's index of commodities surpasses the all-time high it made in June 2008. Sugar and grains are the main culprits, but another key staple, rice, remains well below record levels.
A flood of investor capital into commodity markets too small to handle it has keyed surging prices. In an article that could have been written in Spring 2008, a former NYMEX local sees a continuation, noting "these are buyers that are completely price-insensitive -- and never sell." Never?
In echoes of 2008, commodities, many at multi-year or all time highs, appear to be an accepted asset class. "We are seeing investors flock to commodity resources," notes an analyst, "that pattern will continue regardless if prices move higher or lower." If they move lower?
Tom Lydon points out that the five top-performing ETPs over the past month were all products tied to crop futures, including: Cotton (BAL; +41%), Sugar (SGG; +31%), Agriculture (JJA, +20%), Corn (CORN; +20%) and Grains (JJG; +18%). A potent mix of poor weather (which has reduced crop yields in key locales) and growing global demand bodes well for a continuation of the rally, he says.