THE SOFT COMMODITY BOOM CONTINUES

Some call it the Bernanke effect, some blame the BRIC nations, while others blame rising soft commodity prices on the weakening USD.

JIM ROGERS clearly has been spot on as far as the boom in soft commodities goes. Food inflation is making headlines again!

Clearly some of the commodities may be rather overpriced at the moment. Meanwhile speculators and commodity hedge funds continue to build positions in this rather overbought sector. Caveat emptor - Watch this space!

Source : Commodity Prices / Quotes & Commodity Charts - Free - A fantastic site for commodity charts.

COMMODITY MELTDOWN !!

When you look at a chart that has witnessed an almost vertical drop, you know that its worth a second look!!!!! As the CRB Commodity Index shows, gains accumulated over the last 3 years were wiped out in 4 months!!
This deleveraging commodity meltdown has been much faster than most expected, as speculators and leveraged hedge funds have bailed on this once '''must have sector'''. Now that the'weak hands' have been forced out, commodities look interesting again!!!
Welcome to Commodities round 2!










While I am not a big fan of Base metals/metal ores, even these commodities have seen a sharp selloff! Given the global slowdown and recession we are in, industrial metals and ores could take a while to recover.
GOLD - meanwhile has held its own amidst all the turmoil in the credit markets, stock market and in the real economy. I repeat that Gold IS NOT A METAL, but a currency that is a true store of value.
It is one of the most liquid mediums of exchange; something that many high networth individuals who are trapped in ILLIQUID HEDGE FUNDS may now realise!

I continue to be quite optimistic on soft commodities, such as corn, wheat, soybean and other agriculturals, which continue to see growing demand in emerging markets along with the alarming possibilites of reduced acerage and farmer bankruptcies on the back of the recent food grain price collapse.
I have never been a supporter of using 'food for fuel', but irrespective of the meltdown in the ethanol industry, these food crops look interesting at this stage.

Coming to Crude Oil, although the selloff has been sharp, in the near term a demand slowdown can cap any attempts of a rally here. However you must remember that the recent strength in the USD has been showing some sings of weakening lately, and any USD currency volatility / crisis in 2009 will support crude oil prices even if demand fails to recover.
Longer term I remain an oil bull, given the lack of fresh capacities added, as also growing consumption in Asian economies.












Will post more on Crude Oil and Soft Commodities in coming weeks.

RISING FOOD PRICES

Rising food prices continue to fuel inflation fears the world over. Flooding due to rain in the US midwest and a weaker US Dollar are driving prices higher
http://www.reuters.com/article/ousiv/idUST29090620080609
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRT0a6qnmxwg&refer=home
While Corn prices are at record highs, Wheat prices pulled back sharply from their recent highs, as Wheat production is expected to increase this season.
'''''Food Price driven Inflation'''''' is going to be a serious challenge for many governments and Central Banks in an election year (read: Elections in the US & India)
WHEAT
CORN
SOYBEAN

TIME TO EXIT SOFT COMMODITIES (Food Grains)

With everyone piling into soft commodities, I think we have hit a short term top in the food grain market.
While demand for food grains far exceeds supply, the vertical rise in price of these food grains warrants caution. Speculation is high, and everyone is desperate to join this party.

At these levels, a sudden sharp pull back, is likely to cause panic selling, a triggering of stop losses and losses for short term speculators.
Even in a long, multi year bull market in these commodities, be prepared for corrections, which can be used for fresh entry points.

For now, if you can't stand the heat, then stay out of the kitchen.

Corn:Wheat:Soybean: