Gasoline Supplies - Lowest Level Since 1991

From Agora's 5 Min. Forecast:

Gasoline supplies are at their lowest level since 1991. Measured in “days of gas available,” the Energy Department reported that, for the last week data were available, the U.S. has only a 20-day supply… the lowest since the first Iraq war.

Yet despite these supply levels, gas prices remained at a nationwide average of about $2.80 all last month. With the summer driving season drawing to a close, we might see lower prices still.

WSJ - Wheat's Surge to Pinch Wallets

From the WSJ:
Full article (subscription required)

Food Prices Face
Increasing Pressure
As Futures Hit High

By TOM POLANSEK
September 5, 2007; Page C8

CHICAGO -- Consumers in the coming months will have to pony up a little more money at the grocery store for flour, bread and other baked goods as record wheat futures prices are driving up food costs, analysts said.

Wheat futures have soared this summer amid serious crop losses in key growing areas of the Northern Hemisphere, including Europe and the Black Sea region. Dryness in Australia also threatens to slash production Down Under for the second year in a row.

Trader anxiety over shrinking world supplies lifted nearby-month Chicago Board of Trade wheat futures to a record of $8.10 per bushel, exceeding the previous high of $8.05 set Friday. The contract settled at $8.07, up 40 cents. A year ago, it traded at $4.04.

Full article (subscription required)

Sugar Has Never Been This Cheap Relative to Crude Oil

From Bloomberg News: Farm commodities are the new stars

According to the article:

• Sugar has never been this cheap relative to crude oil.
• Jim Rogers, my hero, does not see the credit crunch affecting the soft commodities. "There are three billion people in Asia who were not involved the last time we had a commodities rally and aren't going to lose their appetite because of problems in the U.S."
• Marc Faber, analyst and investor, said prices of agricultural commodities were "still extremely low" in real terms and "look relatively attractive" because of potential weather disruptions.

I am thinking it's time to pick up some more sugar contracts. I sold near the last relative peak, but them mistimed by re-entry and continued to buy on the way down. But hey - while prices could go lower, they are cheap right now. I didn't think we would see sugar prices under 10 cents this soon.

And if you're the hedging type - pick up a few sugar contracts and short crude oil. They can both be used for fuel, after all.

Russia May Ban Wheat Exports

From Agora's 5 Minute Update:

Among other things, Kevin (Kerr) will be commenting in Milan on the fact that Russia -- the world’s fifth largest wheat exporter -- is considering banning the sale of wheat to foreign nations. Moscow officials are concerned about wheat’s skyrocketing price and its effect on the Russian consumer… especially on the eve of national elections.

“The announcement that the Kremlin is considering a ban on exports is absolutely one of the most bullish pieces of news we’ve heard for wheat in a while,” Kevin wrote to us. Wheat is currently priced at $8.06 per bushel. "Given this news, $9 a bushel is a real possibility,” says Kevin. ”Export inspections are running very high and demand is huge.”

Wheat Crosses 800 Cents

I feel like a broken record - but this is one helluva ride! Wheat futures crossed the 800 cents mark this morning.
Chart

There are ongoing harvest problems contributing to the situation. Remember that wheat inventories are already at a 26-year low, so there is no slack in the system.

How high can prices go? Honestly I have no idea. I am not a buyer at these prices - things are just too crazy. I'm content to fasten my seatbelt and hang on for the ride.

As commodity investors (as opposed to traders), we need to keep things in perspective. Short term, I'm not sure where prices are heading (though I'd love to hear input from chart readers - Toby, any thoughts?)

I do know that next year, more wheat will be planted than has been planted in awhile. Where will the acreage come from? Corn, soybeans, and cotton. The cheapest crop will probably get shafted the most - and that looks like cotton at the moment.