Agro Commodities - My take

Published: Fri, 03/04/16

I just sent out a note on Agro commodities. And then I spent some time looking at the Agro charts. There is no change in my view on the charts as put out last time for global agro prices. They all appear to be bottoming out. So while these videos post a negative picture of the situation they do so after they have already profited from it. Now the guy appears very knowledgable but whent it comes to fundamentals in Agro I find that everyone knows why a move occurred after it occurs and are rarely ahead of the curve.

I fact he has given the answer as well.Unlike in energy no producer owns more than 1% of the production. That is important. Because no producer would logically sell a commodity below the cost of production. So why do prices fall? They do so in freely traded markets due to the existence of speculators. In some markets like we saw in energy a large producer can bring down prices to kill other producers. Cartels can act in their vested interest. But if no one owns a significant part of the production in general such a trend will not last. You will rarely sell far below production for long. So commodity cycles will continue to exist. And food is a defensive sector even in a recession. Food is also the quickest to reflect inflation because the cost of production goes up.So lets see Agro prices in most cases are at interesting levels and with the general trend in commodities turning up it is an added kick.

I will post the individual Agro charts again soon.