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food commodities could outperform stocks

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stock markets along with other paper assets take a beating on global debt woes and anemic economies.  there has been a rush to perceived safe havens such as gold and us treasuries (downgrade notwithstanding).

a potential alternative according to sudakshina unnikrishnan, commodities analyst at barclays capital: "with agricultural commodities, even in periods of recession or a downturn in global growth, demand doesn't decline in the same way as it does across energy and metals markets."

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caroline henshaw, dow jones on 8-9: in the six months to june, the sector saw total inflows of $5 billion—almost 40% of the total--including the largest quarterly influx on record, according to barcap. this trend reversed in the second quarter, with $2.2 billion of outflows, the first since the financial crisis.

etf securities said that its agriculture exchange traded products have
recouped one-quarter of their first-half outflows over the past month,
"suggesting that much of the first half outflows may have been short term
profit taking".

"we would...expect agricultural prices to outperform the rest of the
commodity complex, especially the more cyclically-leveraged energy and
industrial metal sectors," said goldman sachs.

much of agricultural markets' resilience comes down to tight fundamentals.
hot weather across the u.s. corn belt has raised concerns that this year's crop will once again fall short of demand at a time when stocks are already at historically low levels.

“food related commodities may not be on the same leash to global economic woes as paper assets, but a severe enough slowdown may reach them as well” according to adrian muller, principal of time leverage capital.

agricultural markets have had a bumpy ride this past year – and much volatility may lie ahead.   nonetheless, the sector may be a good diversifier in shaky times.

in sugar too, concerns that output from top producer brazil will fall for the first time in a decade in 2011-12 has pushed up prices and spurred managed money investment to a record 26% of open interest.

jp morgan said it expects sugar and gold to see the most future upside.

"dollar weakness and rising inflation expectations also open the upside for
raw sugar prices to surge far higher than would otherwise be likely, perhaps
doubling or more in a spike," said the bank.

Read 10617 times Last modified on Thursday, 01 August 2013 10:57
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  • adrian muller has conducted seminars for the chicago board of trade, including a key series in 1999 which cautioned about a top in the equity markets (see his article “top experts and statistics on the dow”). adrian muller has appeared on cable tv financial programs with analysis on the futures markets and equity market directional forecasts. he has been quoted in barron's, the wall street journal, and futures magazine.

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