Best of the Week
Most Popular
1.Spain Ignores Scotland Lesson as Catalan Independence Referendum Could Spark Civil War - Nadeem_Walayat
2.Used Car Buying From UK Dealer Top Tips, CarMotion.co.uk Real Customer Experience - N_Walayat
3.Spanish New Civil War Begins as Madrid Regime Storm Troopers Quell Catalan Independence Rebellion - Nadeem_Walayat
4.Virgin Media Broadband Down, Catastrophic UK Wide Failure! - Nadeem_Walayat
5.Are the US Markets setting up for an Early October Surprise? - Chris_Vermeulen
6.The Pension Storm Is Coming To Europe—It May Be The End Of Europe As We Know It -John_Mauldin
7.Stock Market Crash 2018; Will it Prove to be Another Buying Opportunity - Sol_Palha
8.The Profoundly Personal Impact Of The National Debt On Our Retirements - Dan_Amerman
9.Stock Market as Good as it Gets; Like 2000 With a Twist -Gary_Tanashian
10.1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned - Nadeem_Walayat
Last 7 days
Bitcoin Hits $6,000, $100 Billion Market Cap As Helicopter Ben and Jamie Demon Warn The End Is Near! - 22nd Oct 17
Time for Caution in Gold Miners - 22nd Oct 17
“Great Rotation” Ahead; Will it Be Inflationary or Deflationary? - 21st Oct 17
The Trigger for Volatility, Rates and the Next Crisis - 21st Oct 17
Perks to Consider an Agent for Auto Insurance - 21st Oct 17
Emerging Megatrends Hurting Consumers - 21st Oct 17
A Catalyst of the Stock Market Bubble Bust - 21st Oct 17
Silver Stocks Comatose - 21st Oct 17
Stock Investors Ignore What May Be The Biggest Policy Error In History - 20th Oct 17
Gold Up 74% Since Last Stock Market Peak 10 Years Ago - 20th Oct 17
Labour Sheffield City Council Employs Army of Spy's to Track Down Tree Campaigners / Felling's Watchers - 20th Oct 17
Stock Market Calm Before The Storm - 20th Oct 17
GOLD Price Creates Bullish Higher Low - 20th Oct 17
Here’s the US’s Biggest Vulnerability in NAFTA Negotiations - 20th Oct 17
The Greatest Investing Lesson Learned from the 1987 Stock Market Crash - 20th Oct 17
Stock Market Time to Go All-in. Short, That Is - 19th Oct 17
How Gold Bullion Protects From Conflict And War - 19th Oct 17
Stock Market Super Cycle Wave C May Have Started - 19th Oct 17
Negative Expectations, Will the Stock Market Correct? - 19th Oct 17
Knowing the Factors Affect your Car Insurance Premium - 19th Oct 17
Getting Your Feet Wet In Crypto Currencies - 19th Oct 17
10 Years Ago Today a Stocks Bear Market Started - 19th Oct 17
1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned - 19th Oct 17
Virgin Media Broadband Down, Catastrophic UK Wide Failure! - 19th Oct 17
The Passive Investing Bubble May Trigger A Massive Exodus from Stocks - 18th Oct 17
Gold Is In A Dangerous Spot - 18th Oct 17
History Says Global Debt Levels Will Lead to Another Crisis - 18th Oct 17
Deflation Basics Series: The Quantity Theory of Money - 18th Oct 17
Attractive European Countries for Foreign Investors - 18th Oct 17
Financial Transcription Services – What investors should know about them - 18th Oct 17
Brexit UK Vulnerable As Gold Bar Exports Distort UK Trade Figures - 18th Oct 17
Surge in UK Race Hate Crimes, Micro-Racism, Sheffield, Millhouses Park, Black on Asian - 18th Oct 17
Comfortably Numb: Surviving the Assault on Silver - 17th Oct 17
Are Amey Street Tree Felling's Devaluing Sheffield House Prices? - 17th Oct 17
12 Real-Life Techniques That Will Make You a Better Trader Now - 17th Oct 17
Warren Buffett Predicting Dow One Million - Being Bold Or Overly Cautious? - 17th Oct 17
Globalization is Poverty - 17th Oct 17
Boomers Are Not Saving Enough for Retirement, Neither Is the Government - 16th Oct 17
Stock Market Trading Dow Theory - 16th Oct 17
Stocks Slightly Higher as They Set New Record Highs - 16th Oct 17
Why is Big Data is so Important for Casino Player Acquisition and Retention - 16th Oct 17
How Investors Can Play The Bitcoin Boom - 16th Oct 17
Who Will Be the Next Fed Chief - And Why It Matters  - 16th Oct 17
Stock Market Only Minor Top Ahead - 16th Oct 17
Precious Metals Sector is on Major Buy Signal - 16th Oct 17
Really Bad Ideas - The Fed Should Have And Defend An Inflation Target - 16th Oct 17
The Bullish Chartology for Gold - 15th Oct 17
Wikileaks Mocking US Government Over Bitcoin Shows Why There Is No Stopping Bitcoin - 15th Oct 17
How to Wipe Out Puerto Rico's Debt Without Hurting Bondholders - 15th Oct 17
Gold And Silver – Think Prices Are Manipulated? Look In The Mirror! - 15th Oct 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Agri-Stocks and Agri-Food Prices: Both Strong

Commodities / Agricultural Commodities Jan 09, 2017 - 12:02 PM GMT

By: Ned_W_Schmidt

Commodities

When has food been more valuable than technology? Aside from all of history, that was especially true in 2016. Chart below is our Investment Scoreboard for 2016. In it are portrayed the returns for a variety of important market measures. Gold stocks, Silver, oil, and Agri-Equities clearly owned the year. Agri-Equities, number four in chart, substantially outperformed most of the equity markets. In 2016 food was clearly more valuable than those tired, old, over owned technology and internet stocks as indicated by the NASDAQ 100 being far down in the list.


Investment Scorecard

Commodities clearly were the strength in markets during 2016. As we observed above, that commodities performed substantially better than the NASDAQ 100 is a development that should be especially noted. Consensus view at this time a year ago was to avoid commodities and look to stocks such as those that dominate the NASDAQ 100. The 2016 consensus view was a classic example of why one might want to avoid investing in the consensus.

Agri-Food prices also had a good year. Seeing no reason to argue with a rule that supports our opinion, we accept common view that a 20% or more rise from an important low suggests that a new Agri-Food bull market might be emerging. The Agri-Food Price Index made an important low in first week of October. From that low, the index rose 24% to a new 52-week high. Latest value for that measure is 21% above the low.

Strength is also observable at the individual Agri-Commodity level. The average gain for 18 Agri-Commodities from their respective 52-week lows is 25%. While averages can mask some wide variations in the data, 9 of 18, or 50%, are 20% or more above their 52-week lows. That phenomenon is shown in chart below.

Agri-Food Prices

Why have Agri-Food Prices risen so strongly? While record harvests have occurred in some parts of the world, demand has continued to rise. Demand is a crucial part of pricing, and perhaps too much ignored by many commodity analysts. According to the USDA, during the two years ending in crop year 2017(August), total consumption of grains will have risen by 3.3%, or 83 million tons. That tonnage increase is a third larger than entire U.S. wheat crop. Increased global Agri-Food consumption in any period of time continues, becoming part of the permanent base of consumption to which will be added any future increases.

World Grain Imports

Best measure of expanding demand for Agri-Foods is imports as they represent unmet domestic demand. Imports of wheat, for example, are the difference between domestic consumption and domestic production. Imports are accomplished by purchases in global grain markets from nations producing a domestic surplus. As wheat is not a collectible, nations do not import it unless someone wants to eat it. And note, once a nation is hooked on imported food that will be the situation forever.

In chart to right are portrayed, by crop years, global imports of rough grains, soybean, wheat, and rice. As can be observed, demands on global grain markets have continued to grow. Last bar is our forecast for imports of those grains in 2026.

Most of this expected growth is to come from India, Africa, and other developed nations, as well as China continuing to expand imports. India, due to rapid economic growth, will likely expand imports by 70-80 million tons over the next decade. Food imports of developing nations are growing rapidly as their economies keep developing. Hottest corn import markets are Sub Saharan Africa(#1), Southeast Asia(#2), and North Africa(#4). One of the questions the world will have to answer in the next decade is how the rising demand for food from India and Africa can be met and/or what price will be required to meet that demand.

Diversification remains one of the most powerful tools available to investors. As history has shown, Agri-Commodities should be part of that diversification. As demand for Agri-Commodities is global as people in every country eat each day, total risk of portfolios will be reduced and returns should be enhanced. And note, we have never had to worry about a battery within an apple exploding.

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 © 2012 Ned W. Schmidt - All Rights Reserved

Ned W Schmidt Archive

© 2005-2017 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

Catching a Falling Financial Knife