Today’s commodities report takes a look at the recovery in silver, another comeback for coffee, and some concerns about agricultural exchange-traded products. The price of silver is up about 4.5% at mid-day, having posted an intra-day high so far of $37.90/ounce. Gold is higher as well, but only marginally, up about 0.26% compared with silver’s rise of about 4.26%. Both the precious metals are rising again as the US dollar loses some of its recent lustre.
As we’ve already noted, demand for silver is expected to rise by 6.5% annually through 2015. That figure is led by industrial demand, which takes up about 50% of the world’s supply. Because there are few substitutes for silver in industrial products, growing demand for things like solar panels, plasma TVs, and movie film is expected to keep silver prices trending upward.
Silver coin purchases from the US Mint have topped 92 million tons so far in May, higher than full-month sales in both March and April. The holdings of silver ETFs, including the iShares Silver Trust (NYSE: SLV) have fallen by 1,276 tons so far this month, leaving a total of just over 14,000 tons in the vaults. If these numbers hold, May 2011 will be the weakest month on record.
For the year, however, silver and silver miners should remain strong. The Global X Silver Miners ETF (NYSE: SIL) is up more than 1.5% today, at $24.99, within a 52-week range of $13.16-$31.34. Silver miner Silver Wheaton Corp. (NYSE: SLW) is up more than 3%, to $36.75, in a 52-week range of $17.28-$47.60. The SLV ETF is also up nearly 3%, to $36.77, in a 52-week range of $16.94-$48.35.
Coffee, like silver, is back on an upswing and that’s not good news for coffee purveyors like Starbucks Corp. (NASDAQ: SBUX) and The J.M. Smucker Co. (NYSE: SJM), which sells Folgers, Dunkin’ Donuts, and Millstone brands. Prices for arabica beans are up to $2.65/pound, about $1.50/pound higher than the lower-grade robusta beans.
Smucker’s raised coffee prices an average of 11% yesterday, and Starbucks boosted prices by about 17% earlier today. Arabica prices are rising as the supply has not been able to keep up with demand. Poor harvests due to bad weather in Brazil, Colombia, and Mexico get the blame for the higher arabica prices, while booming harvests in Vietnam and Indonesia have kept the price of robusta beans low.
Smucker’s shares are trading down about -1.25%, at $76.44, in a 52-week range of $54.39-$78.36. Starbucks’ shares are down by about -0.5%, at $36.13, in a 52-week range of $22.50-$38.21.
Finally today, analysts at Societe Generale say that investors in exchange traded products like ETFs and ETNs have been withdrawing cash from the funds at a rate not seen for two years. The net outflow for May is already $600 million, which is more than withdrawals from base metal, commodity index, and energy funds combined. Only precious metals withdrawals of $3 billion surpassed the flight of cash from ag products.
But SocGen believes this is a temporary phenomenon and recommends that investors initiate long positions in commodities, including ag products. The bank thinks the dollar will continue to weaken, making the investment in dollar-denominated commodities a good buy for buyers spending euros, yen, and other currencies.
The Market Vectors Agribusiness ETF (NYSE: MOO) is up more than 1% today, at $53.61, in a 52-week range of $35.62-$57.93. The PowerShares DB Agriculture Fund (NYSE: DBA) is up nearly 1.5%, at $32.57, in a 52-week range of $22.85-$35.58. The Teucrium Corn Fund (NYSE: CORN) is up more than 0.5%, to $45.03, in a 52-week range of $23.79-$48.77.
Paul Ausick
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