Analyst, trader sees wheat’s potential in Russian shortcomings and new influx of gold investors.
Kevin Kerr is president of Kerr Trading International and a senior analyst at UncommonWisdomDaily.com, a resource website for traders that is owned and operated by Weiss Research. HAI Managing Editor Drew Voros caught up with Kerr, who splits his time between Florida and Estonia, to talk about his perspective on natural gas, Russia and Eastern Europe, and why he thinks gold and grains are the place for investors to be in 2012.
HardAssetsInvestor: Since you live part of the year in the region, can you give us a little insight on Russia in terms of commodities. What are some of the commodity shortages in Russia right now? What are some of its abundances?
Kevin Kerr: Russia has an abundance of pretty much every commodity, except in the agriculture sector. The biggest things they're missing are technology and investment. And now, with them joining the WTO after years of trying to get in, we hope we’ll see better trade and better encouragement of investment in Russia to improve the infrastructure, improve production on drilling and refining and mining, etc. Russians are going to remain very protective of their oil assets, as well as their mining assets. But it’s a good first step to get them in the WTO.
As far as Eastern Europe goes, they're fully dependent on Russia for heating fuels. And it’s a real problem. We’ve seen what Russia has done with the Ukraine in the past. They're now building a new pipeline to circumvent the Baltic States. And Western Europe is also subject to Russia’s whims — whether they want to continue to send heating fuels over or not.
HAI: How is Russia feeling at the moment about its wheat production? There have been some reports that it had contemplated a possible curb on exports.
Kerr: I’ve put out some wheat trades today. We actually got long wheat call spreads out to July because we feel that Russia will curb exports, that buyers will turn to the U.S. for wheat supplies. There are problems for other grains, too. In South America, we’ve had mixed weather reports and quality of crops. Those of us who are bullish on the grains question the USDA numbers that have repeatedly come out sounding very bullish. But if you really crunch the numbers and talk to farmers, it just seems far too optimistic.
When you put all three of those things together — corn, wheat and soybeans, which have been crushed over the last year — are all already making a good comeback. We have beans approaching 12 cents. We have corn back up to $6.50 and wheat is maybe higher. So all the grains right now are very attractive at these levels. I’m a firm believer that the grains will correct this year to the upside.
HAI: What would be the timing on an announcement on wheat curbs in Russia?
Kerr: It’s probably going to be more toward the middle or end of March as we approach planting intentions here in the U.S., before planting actually begins. Of course, they could come out at any time saying they're not going to export.
HAI: How are you feeling about gold?
Kerr: I really believe that gold will break out this year, based on all the currency risk we’re seeing and an influx of new buyers, protecting themselves against, certainly, the dollar and the euro fall, but really, the broad-based fiat currency fall.
This could be the year that gold goes over $2,000 and sustains it, and maybe even marches higher than that.