“Wealth Creation Through Global Agri-Food Investments
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The AGRI-FOOD VALUE VIEW
“Wealth Creation Through Global Agri-Food Investments”
INTERIM COMMENT 12 January 2010
Weather seemed to be the story that
belonged in 2009, but managed to show
up again early in 2010. Record setting
cold weather such as has been generally
experienced in the Northern Hemisphere
is having some impact on Agri-Food
markets. Cold weather does have an
impact, particularly on animals and the
ability to deliver grains, causing some
upward pressure on prices. When end of
winter begins to be anticipated some
shedding of the over bought condition in
Agri-Foods prices is likely.
Other factor pushing up prices is the
activity of index funds. Commodity
index funds should be experiencing an
inflow of new moneys and may be
rebalancing. Actual impact of this
money is hard to identify, but some
claim it is there.
Combination of these factors has caused
the Agri-Food Price Index to remain
over bought. The stochastic in the
second chart continues to be maxed out
at over bought. We continue to expect
this situation will lead to some kind of
price consolidation or adjustment.
This week USDA will release another
crop report. It is not expected to provide anything
on which the bulls can chew. That report and
recognition that winter will eventually end could
cause some short-term weakness in prices.
Our motivation for focusing on the possibility of a
correction In Agri-Food prices is that the stocks
seem over extended. If Agri-Food prices were to
enter into a correction, that action could feed a
reaction in the stocks. The markets do seem overly
infatuated with the commodity theme at this time.
For example, the extreme reaction to China’s
release of import figures seems over done. The
year-to-year comparison on Chinese imports was
destined to be strong as last year was so weak due
to the global recession.