Backwardation and contango are two phenomena that define the futures industry of the commodity world. Though the terms have come handcuffed with a negative connotation, those who understand how they work should not sweat their existence. Backwardation is the process by which near month futures are more expensive than those expiring further into the future, creating a downward sloping curve for future prices over time. Contango, simply, has the opposite impact [for more commodity news and analysis subscribe to our free newsletter].
On Tuesday, the CME Group announced that it will reduce grain and oilseed trading hours to 17.5 hours from 21 hours. This comes after last year’s largely controversial expansion, which got significant backlash from traders, brokers and agricultural companies alike. Managing Director of Agricultural Commodities and Alternative Investments at CME Group, Tim Andriesen stated that “Over the past several months, we have received significant customer feedback about the current CBOT grain trading hours. While there were varying opinions about what the modifications to hours should be, we believe these changes balance the needs of our diverse global customers based on their feedback” [for more commodity news and analysis subscribe to our free newsletter].
The agricultural industry was hit hard by the most severe and extensive drought in at least 25 years in 2012, which had an impact on crops, livestock and food prices at all levels. While prices have already started to increase in the fourth quarter of 2012, the majority of the impact on retail food prices will likely be seen throughout 2013, according to a recent report by the United States Department of Agriculture (“USDA”) analyzing the drought [for more agricultural news and analysis subscribe to our free newsletter].
It was a pretty hectic year for agricultural commodities as the summer months wreaked havoc on prices. After the United States endured the hottest 12-month span on record and an abysmal drought, a number of these staple commodities experienced big movements in price and trading volume alike. But now that 2012 is nearing its close, we look back at these funds throughout the course of the year to see which funds outperformed the rest [for more agriculture news and analysis subscribe to our free newsletter].
As 2012 comes to a close, Wall Street begins to look ahead to the coming year and what trends will have the biggest impact on the commodity world. Financial behemoth Citigroup (C) recently came out with an all-encompassing forecast for the next two years for almost every major commodity. Of particular interest was their outlook on ags, as these commodities have been on a wild ride for 2012; one of the hottest summers on record and an extended drought sent futures all over the board [for more agricultural news and analysis subscribe to our free newsletter].
According to the CIA World Fact Book, the United States operates the largest single-country economy in the world. Its gross domestic product for 2011 was estimated at $15.3 trillion, trailing the European Union, which is comprised of 27 different countries, by only $360 billion. China remains in third place, as the developing economy continues to see rapid growth in recent years due to its build out of industrial capacity and its growing class of individual consumers. Growth in the U.S., however, remains subdued below 2%. The global economic slowdown has certainly hampered the nation’s growth, but there still remains a few economic bright spots, namely the advancement of domestic energy production [for more commodity news and analysis subscribe to our free newsletter].