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Rice Rallies on Investor Bets and Discount to Other Grains

August 23, 2010 at 17:40 by Andriy Moraru

The rice futures rallied today as the investors bet that the huge discount of this commodity’s prices compared to other grains will spur the demand and growth. As both wheat and corn may seem overbought to many investors to rally further, the funds are turning their heads to rice, which is currently the worst performing of all grains this year.

The floods in Pakistan and the drought in Thailand also contribute to the better outlook of the rice futures at least for the next few weeks. While wheat rose by about 100 percent since June this year, rice dropped about 1/4 of its price, resulting in the widest price gap since early 2008 for these two commodities. The traders believe that the current price may go up by almost a third by the end of the year and suggest looking at supply as the main moving factor. If the weather continues to press on, the rice will continue to rally.

September rice futures is trading near $11.27 per 100 pounds as of 15:37 GMT on CBoT. It rose from $10.94 or more than 3 percent today.

If you have any questions and comments on the commodities today, use the form below to reply.

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