Commodity ETF Alert October 2013 Portfolio Update
US WHEAT EXPORTS SURGE…
As you know, I sent out an email trade alert on October 10th, recommending subscribers buy the Teucrium Wheat Fund (WEAT).
Here’s some additional insight into why we made this trade, and how it’s performing thus far…
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While US wheat harvests look to be fairly abundant, the same cannot be said for other countries.
In fact, Argentina just announced their 2013 wheat crop would total a shockingly low 8.8 million tons.
The estimated tally is well below the USDA’s estimate of 12 million tons.
Upon hearing the news, investors immediately took wheat over $7.00 a bushel last Friday.
Now, I can hear you asking…
Why is this Argentinean news affecting US wheat prices?
Let me explain…
Argentina’s northern neighbor, Brazil, is a structural wheat importer. In other words, the country doesn’t have the capacity to fulfill its year-to-year needs for the essential grain.
Normally, Brazil relies on Argentina to provide the bulk of its wheat supply.
After all, Argentina is the Southern Hemisphere’s second largest wheat exporter behind Australia.
But with Argentina’s harvest now expected to be the lowest in years, Brazil is turning to the US for help. In fact, Brazil is on track to purchase the largest wheat supply from the US in the last 20 years!
And that’s just the start of it…
China is also a big player in the global wheat market. As a matter of fact, the heavily populated country has orders for four times the wheat volume it purchased last year!
Folks, even though this year’s US wheat crop will likely be hefty, it won’t be enough to shore up the world’s inventories. That’s why the price of this commodity is starting to enter a bullish trend.
Take a look…
As a result of this bullish activity, our newly established position in the Teucrium Wheat Fund (WEAT) has rallied to $17.30 a share. Now remember, $17.30 is the maximum buy- up-to-price for this trade.
In other words, don’t purchase WEAT unless it drops back below this level.
Let’s keep holding our position in WEAT for further upside in coming months!
Now let’s take a look at other major commodities, along with an update on our open portfolio positions…
COMMODITY REVIEW
| COMMODITY | TICKER | CURRENT VALUE | LAST MONTH | CHANGE |
| Energy | JJE | $17.28 | $17.37 | -0.5% |
| Grains | JJG | $46.79 | $46.09 | +1.5% |
| Industrial Metals | JJM | $29.55 | $29.22 | +1.1% |
| Precious Metals | JJP | $67.29 | $67.70 | -0.6% |
| Softs | JJS | $48.25 | $46.40 | +4.0% |
| Livestock | COW | $27.84 | $27.46 | +1.4% |
| All Commodities | DJP | $37.57 | $37.33 | +0.6% |
ENERGY COMMODITIES
The price of WTI crude oil is starting to break down!
In fact, at $98 a barrel, WTI is trading at its lowest level since late June 2013.
Remember, our position in the United States Short Oil Fund (DNO) was designed for just this reason. We knew oil was overvalued at $106 a barrel. As a matter of fact, I wouldn’t be one bit surprised to see crude trading at $90 a barrel by the end of November.
Why?
US crude inventories are rising while demand is waning. In fact, the EIA reported yesterday that crude stocks rose by 4 million barrels for the week of October 11th.
Folks, we’re in a very good position with DNO. Keep holding this inverse oil ETF for higher prices as oil trades lower in coming weeks!
As far as natural gas goes…
Natural gas traded to a 3-month high last week as investors prepared for the onslaught of the winter heating season. Since then, the commodity has weakened due to a bout of technical selling.
However, as long as warm temperatures don’t consume the US over the next few weeks, natural gas should stay above $3.50mmBtu.
As you may be aware, the last week of October and first week of November generally mark the end of the injection season. Natural gas inventories start declining into December as cold weather arrives.
And the colder the weather, the quicker the price of natural gas will rise this winter…
Let’s shift our position in the US 12-month Natural Gas (UNL) back to a buy to capitalize on the oncoming winter. You can purchase at any price under $17.00.
GRAIN COMMODITIES
Corn has yet to put in much of a rally thanks to continued expectations of a huge US crop. Corn is currently trading just under $4.40 a bushel. However, that’s actually up from the $4.32 low set on October 14th.
Where does corn go from here?
The next WASDE report from the USDA is scheduled for November 8th. Remember, with the US Government shutdown, the October 11th report was cancelled. That means investors are hard pressed for information in all the grain markets.
Watch for big price moves on this important release. And if you haven’t already, go ahead and buy the Teucrium Corn Fund (CORN) up to $34.00.
INDUSTRIAL METALS
Copper is still stuck in a sideways trading pattern near $3.30 a pound. Recent Chinese economic releases just haven’t been strong enough to push the metal higher.
However, that may be about to change…
GDP data released late last week revealed the Chinese economy grew at a 7.8% clip in the third quarter. As a result, we should see global copper inventories dip as China bellies up to the table.
The mixture of a strengthening Chinese economy and lower global copper inventories will likely be enough to push the red metal to the $3.50 area by year-end.
As a result, let’s keep holding the iPath DJ-UBS Copper (JJC) for higher prices.
PRECIOUS METALS
The fog of political uncertainty is starting to lift from the precious metals complex…
In fact, bullish investors are jumping back into platinum, palladium, gold, and silver with a vengeance. In fact, the entire metals complex has tacked on impressive gains in recent trading.
Why?
As you’re likely aware, the US debt ceiling debacle has been pushed out until February 7, 2014. Politicians couldn’t get a handle on the situation last week, so they simply kicked the can down the road.
And that creates additional uncertainty for the US Dollar…
What’s more, Federal Reserve board members are publically stating that their once “imminent” tapering plans have now been pushed out into 2014.
Folks, no matter how you slice it, this is good news for precious metals.
Our positions in the ETFS Physical Palladium Shares (PALL) and iPath DJ-UBS Platinum (PGM) are looking better by the day. Keep holding both ETFs for higher prices.
However, since the near-term supply/demand fundamentals aren’t nearly as bullish for gold and silver, we’ll need to wait to get long on these metals.
SOFTS
The price of sugar received an unexpected jolt when a fire destroyed nearly 180,000 metric tons of sugar at a Brazilian port last week. The sweet commodity jumped to 11-month highs at $0.20 a pound on the news.
As you may know, Brazil is the world’s largest sugar producer. Not only was a large quantity of sugar destroyed, but the Santos, Brazil port will be offline for the foreseeable future as clean up and repairs progress.
As far as cocoa goes…
Bulls are carrying the luscious bean to new 52-week highs. Dry West African weather mixed with an ill-timed decision to reduce fertilizer subsidies in Ghana (one of the world’s largest cocoa producers) has investors preparing for a long term cocoa shortage.
Coffee and cotton continue to underperform as global fundamentals point to lower prices.
LIVESTOCK
The feeder cattle market is on fire…
Feeders ran to all-time record highs in recent weeks thanks to falling feed costs (wheat and corn) and a continued run of low feedlot numbers.
And listen to this…
An extremely harsh blizzard swept through the South Dakota plains a few days ago. The surprise early season storm is estimated to have killed an estimated 100,000 head of cows and calves.
As you may know, the South Dakota cattle herd was the sixth largest in the nation.
This unfortunate development will further support rising feeder prices as cattle inventories are certain to keep falling.
As a former rancher myself, I know the situation is devastating. Decades of hard work were wiped out in a matter of days. Many hard working ranchers will likely go out of business due to this enormous setback.
I wish them all the best in these trying times.
Category: Commodity Trading
