Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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

© 2005-2019 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