Tight Supplies, High Demand Give Legs to Soft-Commodity Rally – WSJ.com

Commodities Mar 05, 2011 No Comments

Commodities from cotton to coffee hit multi-year highs this week, and new crops aren’t expected to arrive in time to cool prices in the medium term.

The Dow Jones/UBS Commodities Index hit 169.639, its highest intraday level in nearly three years, on Friday as soft commodity markets surged on the heels of a positive U.S. jobs report and a warning from the United Nations that higher oil prices could spark a repeat of the 2008 food-price spike.

On Thursday, the U.N. Food and Agriculture Organization said its food-price index rose 2.2% in February, a record in real and nominal terms since the body started monitoring prices in 1990.

“It does appear that markets are quite tight at the moment,” said Divya Reddy, an analyst at Eurasia Group. “The harvest season in the coming months will determine just how much supply will actually come online.”

Some analysts have said sugar and corn supplies for consumption could be crimped because both crops are used to make biofuels, an alternative to oil. Crude futures are up more than 6% this week, spurred by worries about oil supplies amid unrest in Libya. The futures touched a high of $104.60 a barrel Friday, the highest price since September 2008.

via Tight Supplies, High Demand Give Legs to Soft-Commodity Rally – WSJ.com.

Rod Sherkin

Rod is a former senior executive, responsible for Purchasing, for both Pillsbury and Ball Packaging back in the 80’s and 90’s. Since then, he has continued to work in the Purchasing field as both a consultant and founder of the website Propurchaser.com.