Best of the Week
Most Popular
1.UK House Prices BrExit Crash NOT Likely Despite London Property Market Weakness - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit Implications for UK Stock Market, Sterling GBP, House Prices and UK Politics... - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.FTSE and Sterling Brexit Trading, Deconstruction of the EU Referendum Result - Nadeem_Walayat
7.UK Interest Rate Cut to 0.25% Imminent and More QE Money Printing - Nadeem_Walayat
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.The Stock Market is Reading it Wrong! - Chris_Vermeulen
10.Breakouts Galore in Gold and Silver - Jordan_Roy_Byrne
Free Silver
Last 7 days
Gold and Silver Bull Phase 1 : Final Impulse Dead Ahead - 30th July 16
SPX Stock Market Uptrend Resumes - 30th July 16
Gold And Silver – Merkel: Example Of How Clinton Is A Globalist Puppet - 30th July 16
Some Thoughts at the Stock Market Mountain Top - 30th July 16
Gold Stocks Benchmark Battle - 30th July 16
Top 10 Pokemon GO Playing Tips, Tricks and Secrets! - 30th July 16
Asset Bubbles Tend to Crash with a Vengeance - 29th July 16
Retirees Are Risking Their Life Savings on Junk Bonds - 29th July 16
The Next Recession is Coming - Expect Around 0% Returns for the Next 7 Years - 29th July 16
SPX is Shaking and Rolling - 29th July 16
Stock Market Insiders Are Secretly Selling, Cycle Top Next Month - 28th July 16
FOMC Interest Rates and Their Impact on the US Economy - 28th July 16
The State Of The Economy - 28th July 16
Elliott Wave Crash Course - 3 Ways the Elliott Wave Principle Enhances Your Trading - 28th July 16
Japan's "Helicopter Money" Play: Road to Hyperinflation or Cure Debt Deflation? - 27th July 16
Monetary Zika - The Insidious Nature of Credit Expansion - 27th July 16
Gold and Pork Bellies - 27th July 16
Silver Is Insurance Against The Worst Part Of This Depression - 27th July 16
Don’t Buy The SPX Hope Stock Market Rally! - 27th July 16
Bitcoin $650 Still in Play - 26th July 16
Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - 26th July 16
The Forex Markets Are Getting Exciting! - 26th July 16
Underpriced Silver Is the “Rip Van Winkle” Metal - 25th July 16
Declines in Multiple Market Indexes - 25th July 16
Retailers Are Doomed as Most Americans Are Too Poor to Shop - 25th July 16
Here’s One Currency That Could Go to Zero - 25th July 16
Stock Market Top is Expanding - 25th July 16
Silver Manipulation – Because They Needed the Eggs - 25th July 16
Silver Market COT Stuns: What's Going On Here? - 24th July 16
Gold Demand Remains Stable During Sector Weakness - 24th July 16
Sernova, Diabetes and Haemophilia - 24th July 16
Russia: Tensions, Turmoil, and Western Hubris - 24th July 16
Soybean Commodity Price to Soar Again - 23rd July 16
SPX Stock Market Uptrend Continues - 23rd July 16
Gold And Silver – Debt Addiction Will Carry Precious Metals Higher, Guaranteed - 23rd July 16
Pokemon Go - How to Play, First Use, Balls, Stops, Catching Pokemon's... Great Excercise! - 23rd July 16
7 Signs That the Gold Market Remains Resilient - 23rd July 16
Basic Income in The Time of Crisis - 23rd July 16
Silver Bull Faces Correction - 22nd July 16
The Serious Warning No One’s Talking About - 22nd July 16
Stock Market Insight from Greed, Volatility, and Put/Call Ratio - 22nd July 16
What Will Happen To the Stock Market When Interest Rates Rise? - 22nd July 16
How to Escape the World’s Biggest Ponzi Scheme - 22nd July 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

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

© 2005-2016 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

Catching a Falling Financial Knife