Many crop market analysts are confident the overall commodity bull market will continue, and that bodes well for crop prices this summer.
They haven’t been rattled by the sudden sell-off of silver, crude oil and other commodities that has frightened many investors and led analysts to call for the end of the commodity bull run.
“In our opinion, this is simply a temporary lull in a commodity bull market,” said Rich Nelson of Allendale, Inc., in McHenry, Illinois.
“We’ve had two or three other calls for the commodity bull market to end in this uptrend, and it hasn’t happened.”
Read Also
Vegetable oil stocks are expected to tighten this year
Global vegetable oil stocks are forecast to tighten in the 2025-26 crop year, this should bode well for canola demand.
Mike Krueger of the Money Farm in Fargo, North Dakota, has a similar view.
“We’ve seen a big reallocation of funds and liquidity in commodity markets caused by different reasons, but those reasons aren’t really sound from a fundamental perspective,” said Krueger.
“I view it just as the in and out flow of cash in these markets, much more than any fundamental change.”
The commodity markets plunged In the first week of May with silver and crude oil helping drive down the CRB Index of commodities from 370 to 340 in less than a week.
Brent crude fell from $125 per barrel to $109, while silver fell from $48 to $34. Money poured out of the commodity markets, taking everything down.
The trigger appears to have been new margin requirements on silver futures contracts at the Chicago Mercantile Exchange, which caused many speculators to quickly reduce positions. Silver had been the market’s hottest commodity in the past year and once it began collapsing, the other commodities could not stay out of the downdraft.
Some analysts argue that the 2009- 11 commodity bull run has ended and that lower prices are the face of the future.
They say that weakening U.S. economic performance, the grave debt problems plaguing Europe and China’s attempts to rein in inflation and commodity demand will reduce the demand that has been inflating commodity prices.
They fear the main prop that has held commodity prices aloft will be knocked out when the U.S. government stops pushing down bond yields in June.
However, crop-focused analysts are more optimistic about crop prices and the overall commodities complex, which is responsible for most of the value of crops.
Many tend to be more bullish about commodities than other sector analysts. As well, most believe the tight supply and demand fundamentals for crops give them a chance to rally again.
“We still need to have great crops, good yields,” said Krueger.
———
access=subscriber section=news, none, none
