As investors, we may be facing an opportunity to get into a market at the start of a major bullish cycle … Agricultural commodities. And that’s because, agricultural commodities have undergone a major reset after responding to soaring prices some four or five years ago.
The same way U.S. and Australian dairy industries flooded the market with milk to meet rising Asian dairy demand, global growers ramped up operations to meet things like ethanol demand in Brazil and feedlot demand in Spain. Supply overshot and prices sunk.
Sure, drought in Spain, Australia and the United States has led the price of wheat to rise nearly 30% in less than two months. That’s a big move. But in the longer-term, it’s still 52% off its high in 2012 and nearly 70% lower than its 2008 high.
And despite the strength in recent weeks, prices for wheat, corn, sugar and coffee are exceptionally low. Check out these long-term price charts:
Are these cycles bottoming out? Looks like a good bet to me. And analysts with boots on the soil suggest the risk of price surprises is to the upside. And when you add in macro forecasts, buying in at these levels makes good investing sense.
And alongside this surge in commodities, consumption is poised for a take-off. In fact, the Deputy Prime Minister of Australia just reiterated an FAO report by saying, “Global food consumption is set to rise 11 per cent per person by 2050—the world will consume more in the next 50 years than we have in the whole of humanity.”
A big reason? You guessed it: China.
As recently as June 2016, Larry Edelson wrote publicly of China’s transition into a consumption-led economy. And new data tells us Chinese consumers will account for 25% of global consumption by 2021. You can bet that includes food.
Thanks to an agreement in May, China can import U.S. beef for the first time in 14 years. Even before that, China imported a total of 22 percent more beef last year than the year before, indicative of richer preferences as China’s middle-class swells.
That’s just the most obvious example of a developing economy where consumers are increasingly moving out of poverty. And exploding innovation in the global AgTech industry will bring greater opportunity to these emerging economies — it will bring greater consumption.
So, hold on to your hats! Agricultural commodities are about to take off. Teucrium Trading offers individual ETFs on corn (CORN) and wheat (WEAT). I also like the iPath Bloomberg Sugar SubTR ETN (SGG) for an isolated play on sugar prices.
Do right,
JR
Mike Massey July 10, 2017
Go look at ticker symbol EEM, INDA, or FXI. This is where you want to be.
Mike Massey July 10, 2017
I am not a huge buyer right now. I want to see the 50 day moving average moving up on the monthly chart. I also want to see prices above the 50 day average on the monthly chart. I never call a bottom. I learned that in the baptism of the commodity market back in the late 70’s.
Harry July 9, 2017
I thought that the Chinese are still rejecting the U.S. GMO laden crops such as corn????
H. Craig Bradley July 8, 2017
Is U.S. the Global Grain Swing-Producer Today ?
Farm commodity prices not looking especially good if you are a U.S. Farmer unless you planted more acres last Fall. Lower unit price. Higher volume ( more land under harvest) may offset some of the food crop declines. WSJ reports other countries have dramatically ramped-up the acreage planted in wheat, corn, and soybeans in the last 10 years to the point they produce enough food for domestic needs and can export a surplus for hard currency ( Russia for Wheat and Brazil for all three commodities).
In fact, overseas Agriculture producers have bigger grain harvest than does the United States Today. We are not the number one farm producer anymore, as we once were in the 1970’s. America is being out-produced and does not control global supplies, as we once did 25 years ago. Developing Countries are maturing using our technology (seeds, fertilizer, and farming methods). Large mechanized fleets of combines similarly harvest grains all around the world today, as we also do in the Midwest. Less need for farm labor than ever. Efficient.
dennis maser July 8, 2017
As a farmer wheat planting was way down due to terrible prices and thus being replaced by soybeans and corn which will have a bumper crop–thus not a good time to believe grain crop prices will raise!!!!!!
Ronald E. Baker July 8, 2017
I’d appreciate some related comments on potash and nitrogen sales/producer shares like MOS, POT, etc.
Same for ADM shares.
CaptTurbo July 7, 2017
Rather than bet on timing individual agricultural commodities I prefer to pick up shares of POT which is also bumping along the bottom and will be increasingly in demand for fertilizer needs as everything else takes off. I enjoy a modest dividend as I wait.
Hmm, I should start up my own financial service if simple common sense is all that is required. 😉
Al July 7, 2017
How does one play coffee futures?
Chuck Burton July 7, 2017
So, American beef will be exported to China, which will cause beef prices for Americans to rise. The same with other foods. It will make the big agricultural conglomerates wealthy, to the detriment of American consumers. Just another machination of the swamp critters. They have become quiet recently, especially in the media which they control, but they are just as active as ever. Trump is one of them, and always has been. He made that deal with China, of course.
lia watson July 28, 2017
Your ignorance of the commodities market is sad: why don’t you learn before you comment: #1: last years’ wheat crop had, to a large degree, a blight and much of it couldn’t be used. This year, the Canadian crop will be much smaller than normal due to LACK OF RAIN! Before you run your mouth, get your facts straight. This years’ bean crop should be “normal”, but like it or not, this country is the bread basket of the world and when the weather doesn’t co operate in either the US or Canada, the world has a food shortage. India and China populations consume so much, it is really hard for the world food market to keep up, so stop blaming “the wealthy”! and BTW, why don’t you learn to plant a garden, like alot of the rest of us….