Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Is Natural Gas Price Ready For An April Rally? - 8th Apr 20
Market Predictions And The Business Implications - 8th Apr 20
When Will UK Coronavirus Crisis Imrpove - Infections and Deaths Trend Trajectory Analysis - 8th Apr 20
BBC Newsnight Focuses on Tory Leadership Whilst Boris Johnson Fights for his Life! - 8th Apr 20
The Big Short Guides us to What is Next for the Stock Market - 8th Apr 20
USD Index Sheds Light on the Upcoming Gold Move - 8th Apr 20
The Post CoronaVirus New Normal - 8th Apr 20
US Coronavirus Trend Trajectory Forecast Current State - 7th Apr 20
Boris Johnson Fighting for his Life In Intensive Care - UK Coronavirus Crisis - 7th Apr 20
Precious Metals Are About To Reset Like In 2008 – Gold Bugs, Buckle Up! - 7th Apr 20
Crude Oil's 2020 Crash: See What Helped (Some) Traders Pivot Just in Time - 7th Apr 20
Was the Fed Just Nationalized? - 7th Apr 20
Gold & Silver Mines Closed as Physical Silver Becomes “Most Undervalued Asset” - 7th Apr 20
US Coronavirus Blacktop Politics - 7th Apr 20
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20

Market Oracle FREE Newsletter


Agri-Foods Coming Full Circle

Commodities / Agricultural Commodities Jul 05, 2011 - 02:18 PM GMT

By: Ned_W_Schmidt


Best Financial Markets Analysis ArticleCircles are somewhat special. They have no starting point nor ending point. Where they end is where they start. Such the time-worn phrase of "coming full circle." This Summer in Agri-Foods where we started this time last year is where we begin again.

Wheat - Cash Chart

In the above chart is plotted the price for U.S. cash wheat. Last Summer two shocks had their epicenter in the global wheat market. Russia was one of those shocks when a dismal wheat harvest forced that nation to ban exports of wheat. That was followed by the Jasmine Revolution , a wildfire that spread across the Middle East consuming in flames despots wherever possible.

Those two events set off a scramble to buy wheat. Russia had for years been viewed as the world's wheat bin. Governments assumed that Russian wheat would always be available, as it had been. Suddenly, it was not. Governments also scrambled to buy wheat with which to make to bread to appease their unruly populations. If bread was not available, those crowds might actual demand liberty.

Wheat prices promptly moved from US$4 per bushel to US$7. That price movement, while certainly appreciated by those with wheat in the bins, actually influenced the supply of wheat very little. In the short-term, supply of any Agri-Foods is price inelastic.

That descriptive term means supply does not respond to price with any speed. No matter what the price of wheat might do, no more wheat would be produced in the Northern Hemisphere till the Summer of 2011. Wheat is not made in a factory. It grows in dirt with addition of adequate nutrients and water. Money alone will not produce wheat, nor corn nor canola nor oats nor barley.

Since that earlier time two events occurred. First, governments in panic mode over bought wheat. Second, the calendar dropped some pages. As happens about the same time each year, the Northern Hemisphere wheat harvest recently occurred. Wheat again flowed to the mills. Russia, apparently having more wheat than originally expected, is moving to resume wheat exports this month. However, buyers are not lining up for that Russian wheat.(Financial Times, 5 July 2011)

Additionally, supply bears recently received a fairly large shock. Expectations had been that the U.S. plantings of corn would be far from adequate. Wheat acres were also expected to decline for the same reason, wet weather. USDA report last week on plantings held no food for the supply bears. U.S. corn planting will reach a near record, second highest since 1944. Wheat acreage planted also appears to be up. The supply bears snarled in revulsion, and prices for corn and wheat promptly plunged.

As highlighted by the rectangle in the wheat price chart, wheat price broke down decisively from the price range in which had been trading. The US$8 support level now seems to be a resistance level for wheat prices. Likewise, corn broke the US$7 support level, turning that price into what looks like a resistance level.

Agri-Food Prices

Chart above portrays the percentage change of prices for major Agri-Food commodities over the previous month. Only sources of real strength have been in the meats. Eggs are in a seasonal upswing while sugar is again having a problem with the Brazilian crop. Note corn and wheat.

What might all this mean for Agri-Investments? First tier Agri-Equities, the large, multinational companies, are likely to continue correcting through the end of Summer. Relative growth in the Asian Agri-Equities should continue to move in a more positive manner. Given the recent crescendo of negative psychology on the Asian Agri-Equities and positive fundamentals, that group of stocks likely saw their bottom in June. Given that few economic sectors have the structural advantages of Agri-Foods over the next decade, investors should spend the Summer learning why hog prices are at a high and for what reasons rice could be the price surprise of the coming year.

By Ned W Schmidt CFA, CEBS

AGRI-FOOD THOUGHTS is from Ned W. Schmidt,CFA,CEBS, publisher of The Agri-Food Value View, a monthly exploration of the Agri-Food grand cycle being created by China, India, and Eco-energy. To contract Ned or to learn more, use this link:

Copyright © 2010 Ned W. Schmidt - All Rights Reserved

Ned W Schmidt Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules