Agricultural trading at CME Group soared 37 percent in January, as growing concern over shrinking grain supplies and rising global food prices fueled an expanding commodities boom.
An average of 1.05 million grain, livestock and dairy futures and options contracts changed hands each day last month at CME, compared with 768,162 during the same month in 2010, the Chicago-based exchange operator said in a report on Wednesday.
Corn futures rallied 52 percent in 2010 and continued climbing this year, reaching a 30-month high today at $6.74 ½ a bushel. The gains reflect a disappointing U.S. harvest, rising demand from ethanol makers and dry weather that hurt crops in Argentina, one of the world’s biggest corn and soybean exporters.
Hedge funds, Wall Street banks and other speculators, seeking better returns than what traditional investments such as bonds and stocks may generate, stepped up buying in commodities over the past year.
Grain and livestock rallies are rooted in basic supply and demand fundamentals, said Jack Scoville, an analyst with Price Futures Group in Chicago.
Speculators “are a big factor, but so is the news,” Scoville said. “We have had weather problems create shortages of grains, or at least perceived shortages, in many parts of the world. That has caught the attention of the speculators and they have bought, with reason.”
“Plus, we have a lot of weather uncertainty,” Scoville said. “So, even though speculators are the primary sponsors of the rally, they have solid reasons to buy and hold and have been doing so.”
Corn futures continued to lead the agriculture trading upswing, with January volume averaging 299,149 contracts each day, up 41 percent from the same month a year earlier and up 54 percent from December. Corn is CME’s most actively-traded agricultural contract, comprising about two-fifths of ag volume.
At today’s close, March corn futures rose 1 ¾ cents to $6.67 ¾ a bushel, up 6.2 percent so far this year.
Livestock trading also increased over the past year, as smaller herds and improving beef and pork demand sparked price rallies.
CME live cattle futures trading averaged 59,088 contracts a day during January, up 25 percent from a year earlier and up 66 percent from December. Lean hog futures trading averaged 43,993 contracts a day, up 24 percent from January 2010 and nearly double the December level.
Agricultural contracts account for about 7 percent of total CME trading. For all CME products, including contracts based on 30-year Treasury bonds and the Standard & Poor’s 500 index, January trading averaged 12.3 million contracts a day, up 9.4 percent from a year earlier.
