Morgan Stanley Answers 5 Big Questions About Agricultural Commodities

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The drought is causing agricultural commodity prices to go haywire.But where are things heading next?

Morgan Stanley’s commodities team has addressed five pressing questions that the current commodities investing environment has prompted.

Read on to see Morgan Stanley’s recommendations for how to see through the messy commodities weather.

How high will corn prices go?

Prices could reach double digits thanks to ongoing weather concerns and inelastic ethanol demand. Upstream agricultural equities stand to benefit most. Corn prices are currently around $8.00 per bushel.

Source: Morgan Stanley

What's the outlook for sugar prices?

There's still likely to be a production surplus, and MS is forecasting sugar prices to fall from $0.19/lb for 2012/2013 compared with $0.21/lb currently.

Source: Morgan Stanley

Will chicken prices rise to offset feed cost inflation?

No. Prices would need to average $0.83/lb for the industry to be profitable over the next twelve months, versus $0.73/lb in the last twelve months. MS expects chicken to be an unprofitable business for some time and remains underweight Tyson and Sanderson Farms and equal-weight Brasil Foods S.A..

Source: Morgan Stanley

How will the recent corn price run impact 2012/13 nitrogen fertiliser demand?

Demand is going to be huge. Corn acreage expectations will call for another large crop in 2013. MS maintains positive outlooks for CF Industries and Agrium.

Source: Morgan Stanley

When will India re-enter the potash market?

It's not clear. India is experiencing medium-high inflation and 'very low' potash use. MS is reluctant to recommend Potash, Mosaic, Intrepid Potash and The Chemical and Mining Co. of Chile.

Source: Morgan Stanley

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