By: Dan Hueber –
I must confess that my heart sunk just a bit as I was working through the overnight news this morning. As anyone who reads my comments on a regular basis knows for some time now I have been touting a belief that the commodity cycle bottomed during 2016 and is poised to advance in the months and possibly even year(s) ahead. Already I have noted that investment banks such as Goldman Sachs and Morgan Stanley have published research and even recommendations that would reflect the same opinion. Now I recognize that this is probably some type of psychological disorder on my part but I always become a little uncomfortable when too many people begin thinking the same way or come up with the same ideas. Maybe there is some biblical connection here relating to the passage from Matthew 13:44 that tells the story of the man who finds a treasure of great value in a field (ag correlation) so the first thing he does is to hide it, evidently so no one else can get it, and then goes out and sells everything else he had to purchase that very field. Of course, it is nonsensical to think that any market trend could be hidden from others and in fact we need interest and buying to generate any kind of rally so I need to allay these fears. That said I came across a story on CNBC of all places that is quoting several analysts as to why we they are optimistic for Ag commodities as we move into 2017. By no means is this to say that I would discount any of the analysts’ opinions as they are certainly akin to my own but rather it was the source of publication. CNBC? This brings to mind the imagine of someone trying to day-trade stocks based on the tip he just read in last week’s local business news. I guess I should not be quite so snarky as yes, we do need to attract interest and fresh buying to move markets out of the doldrums but somehow in the back of my mind at least, this possibly pre-mature attention in media outlets such as this would suggest that we could be stuck in a flat pattern for a bit longer or at least until the spotlight begins to focus on something else. Sometime being a natural born contrarian does funny things to a person.
In another report that actually reflects a “real” shift in the underlying outlook it was reported that the Britain based commodity house ED&F Man purchased Maviga, a major pulse merchant. Recognize that this is not referring to pulse as a verb such l as your heart beat or any other kind of rhythmic vibration but rather pulse as a noun that refers to the edible seeds of leguminous plants. The thinking here is that as the world economy strengthens and populations continue to expand, so will the demand for “vegetarian” products in certain region or the world such as India.
Grain and soy markets did swoon a bit overnight and into early this morning but it would appear that buyers have returned once again to at least the grains. I would anticipate additional short-covering and rebalancing buying between now and the reports next week but again, am not expecting to see prices come out of ranges we have realistically been stuck in for months now. Marcos are all positive as well this morning with crude and metals higher and take note, the dollar is under pressure once again and could be on the way to posting an outside lower weekly reversal. As I commented yesterday, the peak in the dollar could be coming sooner than later in 2017.