Selling soybeans at their highest prices in three decades and corn while it flirts with its 1996 peak is a money-losing trade, according to Goldman Sachs Group Inc. and Deutsche Bank AG.
Corn at $4.55 a bushel is “cheap,” Frankfurt, Germany-based Deutsche Bank says. Goldman Sachs in New York expects soybeans to rise 29 percent in 2008, the best investment it sees in commodities. Investors who followed the banks’ advice and bought raw materials last year profited as the Standard & Poor’s GSCI Index advanced 33 percent, beating the 3.5 percent gain in the S&P 500 Index and the 9.1 percent return from U.S. Treasurys, according to data compiled by Merrill Lynch & Co.
Rising wealth from Shanghai, China, to São Paulo, Brazil, is leading to better diets and straining corn and soybean supplies just as record energy prices boost sales of biofuels. Even after rising 17 percent in 2007, corn costs about $2 a bushel after adjusting for inflation, compared with a $7.80 high in 1974.
“We are in the early stages of a rally that could last 20 years” in agriculture, said Christopher Wyke, product manager at London-based Schroders PLC, which manages $3.5 billion in commodities and is buying more corn and soybean contracts while reducing energy holdings. “Prices are historically cheap.”
