Best of the Week
Most Popular
1.Will UK Interest Rate Rises Crash House Prices? - Nadeem_Walayat
2.Full on Crash Alert for Major World Stock Markets... - Clive_Maund
3.Gold And Silver Market Bottoming? Big Rally Imminent? Reality Check Says NO - Michael_Noonan
4.The Coming Silver Price Rally Will Outperform All Previous Ones - Hubert_Moolman
5.The Trigger For The Upcoming Stock Crash - Harry_Dent
6.Imploding Department Store Results - James_Quinn
7.Dr. Copper is Speaking, are you Listening? ... - Rambus_Chartology
8.Pandemonium in the Stock Market, Dow falls 1,000 points in a week - EWI
9.Asia's Whirling Dervish of Devaluations Has Encircled China's Exports - Keith_Hilden
10.China Weakens the Yuan; Rattles Global Stock and Financial Markets - Gary_Dorsch
Last 5 days
Sturgeon Plays Politics with Syrian Refugee's, Solution Settle Migrants in Hungary and Poland - 5th Sept 15
Jeremy Corbyn’s “Quantitative Easing for People”: UK Labour Frontrunner’s Controversial Proposal - 4th Sept 15
Stock Market Third Wave - Elliott Waves Point to Market Probabilities - 4th Sept 15
Another Hysterically False BLS US Unemployment Report - 4th Sept 15
Bill Gross: Jobs Report Means ‘Fifty-Fifty’ Chance of Fed Sept Interest Rate Move - 4th Sept 15
Will The Government Confiscate Your Gold? - 4th Sept 15
Gold-Silver Ratio in Gear - 4th Sept 15
The Real Threat from China's Stock Market Crash - 4th Sept 15
The Stocks Bear Market Everyone Saw Coming - 4th Sept 15
Why September’s Stock Market Volatility Is a Huge Opportunity for Options Traders - 4th Sept 15
What IF Gold is Just in a Great Big Bull Consolidation Pattern ? - 4th Sept 15
This Stock Market VIX Chart Should Blow Your Mind - 3rd Sept 15
Eurodystopia: A Future Divided - 3rd Sept 15
Stock Market Prepares for the Next Decline - 3rd Sept 15
Europe Rethinks the Schengen Agreement - 3rd Sept 15
BP Oil Company Moves past Mistakes But Still Feeling Price Pinch - 3rd Sept 15
EU Migration Crisis and Population Density, Why Cameron is Right, England Really is Full - 3rd Sept 15
Stock Market Return to Crisis: Things Keep Getting Worse - 3rd Sept 15
Dow Theory Stock Market Sell Signal Examined - 3rd Sept 15
How OPEC’s Attempt to Save Face Affects the Crude Oil Market - 3rd Sept 15
Crude Oil Price Forecast 2015 and 2016 - Video - 3rd Sept 15
The Real Threat from China’s Stock Market Crash - 2nd Sept 15
How Our “Mixed Economy” Created These Mixed-Up Markets - 2nd Sept 15
'Gravity' Is Returning to Stocks and Bond Markets - 2nd Sept 15
OPEC Divorce And Self-Destruction Thanks To Saudi Crude Oil Strategy? - 1st Sept 15
The Beginning Of A New Financial / Stock Market Cycle - 1st Sept 15
Three Things Every Master Trader Knows About Trading Options - 1st Sept 15
Chinese Yuan Revolution? - 1st Sept 15
Take Advantage of Record-High Auto Sales… Before This Bubble Bursts - 1st Sept 15
Pondering Hitler's Legacy - 1st Sept 15
Mainstream Media Goes Berserk - 1st Sept 15
Your Decisive Stock Market Plan to Follow Whilst Most Investors Shiver With Fear - 1st Sept 15
Are There Stock and Financial Markets Investing Opportunities For The Remainder Of 2015 - 1st Sept 15
Crude Oil Price Forecast 2015 and 2016 - 1st Sept 15
REPO Window Hidden $Trillion QE Monthly Volume - 31st Aug 15
Silver and Warnings From Exponential Markets - 31st Aug 15
Stock Market Calls Fed’s Bluff - 31st Aug 15
Why Some ETFs Led the Stock Markets Down Last Week - 31st Aug 15
Stock Market Collapse - Take The Opportunity To Bail Before It’s Too Late! - 31st Aug 15
The Most Important Market Chart on The Planet - 31st Aug 15
Stock Market 50% Retracement - 31st Aug 15
Stock Market Crash Red Alert for 2nd Downwave... - 31st Aug 15
Independant Scotland 1 Year on, UK Civil War If the SNP Fanatics Had Succeeded - 30th Aug 15
Gold’s 7 Point Broadening Top - 30th Aug 15
The Day the Stock Market Shook the Earth: Takeaways From the Dow’s 1,000-Point Drop - 30th Aug 15
Gold Price Rally Marked by Short Covering - 30th Aug 15
Aging Stocks Bull Market - 29th Aug 15
Economic Destabilization, Financial Meltdown and the Rigging of the Shanghai Stock Market? - 29th Aug 15
The Stocks You Should Be Buying After the Market Drop - 29th Aug 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Global Stocks Slide

Rising Oil Price Trend Supports Agri-food Bull Market During 2009

Commodities / Agricultural Commodities Jan 28, 2009 - 03:07 AM GMT

By: Ned_W_Schmidt

Commodities Best Financial Markets Analysis ArticleA perhaps amazing characteristic of trends is that they do not continue indefinitely. One can not help also noticing the inability of journalists to correctly describe trends as they are developing. While they, and we suspect their editors, spend considerable time on grammar, they still seem to have problems with the proper tense for verbs. The difference between falling and has fallen may seem trivial to journalists, but to the analysts they are considerably different.


Is the price of oil falling, or has it fallen? Actually, neither is the case. It is rising. In this week's first graph is plotted the spot price for U.S. oil. Yes, the price of oil has fallen from the unsustainable level reached last year, But, it definitely is not falling at the present time. In fact, U.S. spot oil is up about 40% from the low. And as we always remind, oil is part of the energy component of the asset class known as commodities.

Why is the price of oil rising not falling? A number of possible reasons exist for this change of trend. First, U.S. oil prices became artificially depressed due to storage problems at Cushing, Oklahoma. Inadequate capacity there caused inordinate short-term pricing pressure. Second, oil demand is, over time, going to rise. Popular forecasts seem to have a heavy dose of current trend extrapolation. Third, the massive monetization of debt by the Federal Reserve is creating a surplus of dollars in the world. Those excess dollars are pushing up the price of dollar denominated commodities. Oil and Gold prices are both reflecting that monetary policy in a state of out of control.

A fourth, and perhaps most important, reason for the price of oil moving higher is that a sufficient portion of the hedge fund industry has been liquidated, ending their excessive influence on price. The price of oil, and many other commodities, should not have risen as high as they did. Those highs were artificial, driven by the hedge fund mania. Now, with that selling out of the way, oil, and other commodities, can begin to more correctly reflect underlying trends. If that is the case, then oil and other commodities can be expected to sell for significantly higher prices in the future.

The second graph this week, below, is of the prices of fifteen major Agri-Food commodities relative to their lows of the past year. On average, they are up 20% from their lows. Only two, rice and butter, are at their lows. Two are up about 40% while three are up 30%. Again, Agri-Food commodity prices are not falling. They have fallen, and are now rising. Reality is that the world continues to move over time into an era of global Agri-Food shortages. And since Agri-Food cannot be produced in a factory, neither governments nor charismatic leaders can change that situation.

The growth in the underlying demand for Agri-Food varies little with short-term economic cycles. Rather, longer term trends will dominate the future prices for Agri-Foods. China made an important discovery in the past two decades. Hunger is not a food problem. Hunger is an incomes problem. Raise the income of the population, and hunger will disappear. With those incomes, the people will simply buy the food. For once, and likely the only time, government policy has been effective in altering the level of hunger. Several hundred million people have been raised out of poverty in China in the past twenty years. The greatest shift of that kind in all of history, and they will all be eating.

Each year for the foreseeable future about 15 million people will move into the middle class in China. That will happen regardless of what happens to Chinese exports to the U.S. in the coming week. Of course, the actual number might be less in one year and more in other. Over time the compounding effect of their demand for Agri-Food will place a considerable strain on the global Agri-Food balance. At times the question dealt with how China would feed itself.

With the changing income demographics in the next decade, the question will change. How will the rest of the world afford to eat? Is your portfolio ready to ride this Agri-Food Super Cycle?

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 receive the most recent issue of this publication, use this link: http://home.att.net/~nwschmidt/Order_AgriValueRECENT.html

Copyright © 2009 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.


Comments

Laurent Chatenay
28 Jan 09, 18:01
Agri-foods

How can you profit from rising agri-foods if you cannot buy futures?


Post Comment

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

Biggest Debt Bomb in History