Best of the Week
Most Popular
1.UK General Election Exit Polls Forecast Accuracy - Nadeem_Walayat
2.What's Next for the Gold Price? - Axel_Merk
3.UK House Prices Correctly Forecast / Predicted Conservative Election Win 2015 - Nadeem_Walayat
4.15 Hours to Save England from SNP Scottish Nationalist Dictatorship - Election 2015 - Nadeem_Walayat
5.Exit Poll Forecasts Conservative UK Election 2015 Win - Nadeem_Walayat
6.Gold And Silver China’s Pivotal Role: More Questions Than Answers. Not So For Charts - Michael_Noonan
7.Conservative Win 2015 UK General Election, BBC Forecast of 329 Seats - Nadeem_Walayat
8.Investing and the Lollapalooza Effect - Niels C. Jensen
9.Gold Price Target - Rambus_Chartology
10.Gold Price Nearing An Important Pivot Point - GoldSilverWorlds
Last 5 days
Time To Get Real About China - 22nd May 15
Gold Lifeboat to Global Economies “Titanic Problem” Warn HSBC - 22nd May 15
One Investment Could Save Two Generations' Retirements - 22nd May 15
Investing is About Identifying Gifted and Talented Camps - 22nd May 15
One of Europe's Latest Debt Nightmares - 22nd May 15
UK Immigration Crisis Could Prompt BREXIT, Propelling Britain Out of EU Despite German Factor - 22nd May 15
America Superpower 2016 - 21st May 15
Stock Market Secular Versus Cyclical Investing - 21st May 15
Banking Stocks Break Out with Higher Bond Yields - 21st May 15
The Tech Portfolio Built to Beat the Market - 21st May 15
Gold “Less Sexy” Than Bitcoin … For Now - GoldCore on CNBC - 21st May 15
The Russia-West Rivalry in the Balkans - 21st May 15
The US Dollar and the Precious Metals Complex - 21st May 15
Gold GLD ETF Drawdown Continues Unabated - 21st May 15
Who’s Killing the Stock Market? - 21st May 15
Your Best Way to Profit from the Narrowest Market in 20 Years - 21st May 15
Government Regulation and Economic Stagnation - 20th May 15
It’s Time to Hold More Cash and Buy Gold - 20th May 15
Choppy Asian Stock Markets - 20th May 15
Countdown to Global Financial Collapse - 20th May 15
Will Interest Rates Ever Rise? - 20th May 15
How to Cash in on Amazon Stock’s Amazing Cloud Success - 20th May 15
Three Hidden Forces Pushing Crude Oil Price Back Up - 20th May 15
U.S. Housing Market Strong Numbers in Perspective - 20th May 15
Greece Debt Crisis - Obama Has A Big Fat Greek Finger - 20th May 15
Now Is the Time to Own the Oil & Gas Leaders - 20th May 15
UK Deflation Warning - Bank of England Economic Propaganda to Print and Inflate Debt - 20th May 15
Trading Gold and Silver along with the Pros - 19th May 15
Gold Ticks Higher as London Housing Market Crash Looms? - 19th May 15
Global Stock Market, Commodities Group Analysis - 19th May 15
How Stock Investors Could Profit from the Dark Net Pattern That Few Others See - 19th May 15
The Patriot Act is now USA Freedom Act - 19th May 15
Investing in Europe? 5 Critical Insights to Boost Your Portfolio Now - 19th May 15
Gold Price Trend Forecast - 19th May 15
Stock Market Continues Defying Gravity, Dow New All Time High - 19th May 15
Are Gold and Interest Rates About To Take Off Higher? - 18th May 15
Nikkei Japanese Stock Index Set To Get Smashed - 18th May 15
Silver Price Projections For 2020 - 18th May 15
The IMF Leaks Greece, Institutions Forcing a Debt Default - 18th May 15
Europe's Stocks Bull Market Continues After Correction - 18th May 15
European Banks Vulnerable Today As 2008 Financial Crisis - 18th May 15
Payments, Currencies, and Broken Money - 18th May 15
Learning to Trade Markets - Dealing with Losing Trades - 18th May 15
Stock Market Sell in May and Go Away - Last Hurrah - Take2 - 18th May 15
The No. 1 Reason Stocks Will Climb Higher - 17th May 15
Gold, Silver Distorted Markets, Financial Sophistry, and Moral Hazard - 17th May 15
Stock Market CAC40 Trend Forecast - 17th May 15
Stock Market Diagonal Pattern Nearly Complete - 16th May 15
Gold And Silver - Elite's Game Of Jenga In Place. Your Move - 16th May 15
You’ll Never See a Better Moment to Invest in China - 16th May 15
Are Gold and Silver Stocks Breaking Out? - 16th May 15
War On Cash - Why the IRS Seized All the Money from a Country Store - 16th May 15
Is China Economy a Fire-Breathing Dragon or a Dragon on Fire? - 16th May 15
Silver Buying Only Starting - 16th May 15
Why Opinion Pollsters Got UK Election 2015 Badly Wrong - 15th May 15
Double Black Diamond - What a Bond Bear Market Looks Like - 15th May 15
This “Bubble” Is Set to Kick Off New Energy Profits - 15th May 15
German Gold Demand "Spikes"- Investment Demand Surges 63% - 15th May 15
How GDP Metrics Distort Our View of the Economy - 15th May 15
McDonald's Future Is Hard to Digest (NYSE: MCD) - 15th May 15
Dry Bulk Shipping Index Chart Analysis Update 2015 - 15th May 15
Economic Expansion Ahead? World Stock Markets Analysis - 15th May 15
Why Not Tell Greece How To Run A Democracy? - 15th May 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Biggest Debt Bomb in History

2014 Year of Commodities (March Update)

Commodities / Agricultural Commodities Mar 25, 2014 - 04:42 PM GMT

By: Ned_W_Schmidt

Commodities

That 2013 was a year when equities ruled supreme is now well recorded history. Generally speaking, expectations at the end of the year were that 2014 would be more of the same. Among the popularly reported forecasts were the S&P 500 going to 2,000 while $Gold would plunge to $1,050. While the calendar will ultimately decide the wisdom of those forecasts, reality is already casting doubt on them. Perhaps the numbers in those forecasts were inadvertently switched.



In the above chart are plotted year-to-date returns for some popular investment strategies. Immediately obvious is that the three components of the commodity group are all up while equities, depending on the index, are either down or up only modestly. Also readily apparent is that the Agri-Food Price Index has risen by the greatest amount, achieving a new all time high as shown below. Gold followed in second place. Equities follow in clearly fourth place.

These price returns tell us that demand for Gold and Agri-Foods is stronger than supply. Weak equity prices indicate that supply is in excess of demand. Quite simply, the supply of equities is excessive and the supply of Gold and Agri-Foods is inadequate.

That the Agri-Food Price Index is at a new high is made more significant by pervasiveness of the move in Agri-Commodities thus far this year. As shown in chart below of year-to-date price changes, 14 of 16, or 98%, of the Agri-Commodities have experience price increases thus far in 2014. Those price increases range from +4% for sugar to +60% for hogs. Corn, which some had forecast to trade at US$2.50, has instead risen by 10% and traded over $5 briefly. Why have the prices of Agri-Commodities, as well as those of Gold and oil, risen despite warnings of strong supply? Answer is simple: Demand is stronger than supply.


One perhaps important flaw in the consensus global outlook at turn of the year was that U.S. economic activity would strengthen while outside the U.S. it would weaken. The likelihood that this forecast is "upside down" is increasing. Consumer demand within China, and most of Asia, is strong. For example, milk prices recently hit an all time high in Chicago. Chinese milk imports during 2013 rose 25% and are expected to rise 28% in 2014(theagriinfo.com, 28 December 2013). Such consumption is an indication of rising consumer incomes as milk has not historically been a common consumer product there. Clearly, demand for dairy products is stronger than supply.



Chinese consumers, recognizing a bargain when the Street saw none, bought 40% more Gold in 2013 than in the previous year(bloomberg.com, 9 March). Because of higher prices, Chinese demand for Gold is expected to begin the year weak. Note the wording carefully. Chinese are not selling Gold, they just might buy less than the 1,176 tons purchased last year. We also suspect they are not buying NASDAQ fantasy stocks either. And which of those two are they likely to buy in the future?

Demand for Gold and Agri-Commodities seems to be the dominant factor for prices this year, even after taking into account unique supply situations in some cases. As the year continues to unfold, investor attitudes on commodities, and in particular Gold and Agri-Commodities, need to adapt to the reality of the situation. Street fantasies, like those noted in the first paragraph, are not likely to enhance your wealth. Have they ever?

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: www.agrifoodvalueview.com.

Copyright © 2014 Ned W. Schmidt - All Rights Reserved

Ned W Schmidt Archive

© 2005-2015 http://www.MarketOracle.co.uk - 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

Biggest Debt Bomb in History