Commodity Insight: The times they are a-changin’

Inflation, noticeably absent from the economy the past few decades, is about to rear its head and impact the world of commodities. Far faster than anyone expected and due to several powerfully strong fundamental forces, inflation is being revived and it will be knocking at our doors PDQ.

And because of the revolution about to unfold, I am quick to recall the classic song by Bob Dylan, entitled “The Times They Are A-Changin.’”

Here is the verse that stands out from the classic. The words, “the slow one,” I believe, refer to commodities, while the words, “and the first one now will later be last,” refer to stocks, the Dow Jones and so forth.

The line it is drawn

The curse it is cast

The slow one now

Will later be fast

As the present now

Will later be past

The order is rapidly fadin’

And the first one now will later be last

For the times they are a-changin’

Let’s take a peek at the powerfully strong fundamental forces allowing inflation to be revived at breakneck speed.

From Bill Miller, legendary investor and founder of Miller Value Partners: “I think the change in Fed policy is likely the most significant in over 40 years and if sustained is likely to have dramatic consequences for asset values.”

Miller is specifically referring to the fact that the Federal Reserve for the first time in history, or at the very least the past 65 years, is calling for, hoping for, wishing for and encouraging inflation.

It was in the March-April period when the Fed began its most recent stimulus policy to help the economy and American citizens. The new policy is what Miller is referring to — and did it work, you ask?

Stocks, metals and virtually all markets rallied sharply in value from the March-April period. And now another stimulus package may soon be passed by Congress, which in theory will help most markets rise higher yet.

Another bullish and inflationary force at work is climate change.

From the guardian.com: "This year is on course to be the world's hottest since measurements began, according to meteorologists, who estimate there is a 50% to 75% chance that 2020 will break the record set four years ago. The year 2020 was plagued by hot and dry growing conditions that impacted the crops of Russia and Argentina and Iowa and Illinois. It was also a year of record fires in California that burned 4 million acres and the largest wildfire in the state of Colorado."

In China this year, the nation has experienced 21 large-scale floods, the most in history.

From CNN Business.com: "Everything is gone. Flooding in China ruins farmers and risks rising food prices."

Note too, China has bought a record amount of grains from the United States over the past few months. In fact, soybean prices in recent days have hit their highest levels in two years and wheat prices in five years.

The first column I posted this year was entitled "The Great Grain Robbery of the '70s vs. Today." Here is the opening paragraph: "In the decade of the 1970s, grain prices rose sharply because of two main events. The first was what is now called 'the great grain robbery.' Second was a series of weather issues that provided a tail-wind for prices that lasted into the '80s. According to Wikipedia, 'The great grain robbery was the July 1972 purchase of 10 million tons of United States grain — mainly wheat and corn — by the Soviet Union at subsidized prices, which resulted in higher grain prices in the United States. Grain prices soon reached 125-year highs in Chicago. In a 10-month span, soybeans went from $3.31 to $12.90 a bushel. Food prices around the world rose 50% in 1973.'"

The second column I wrote this year was entitled "A Historic Year and Decade Ahead." The final few sentences read as follows: "My lean is for major bull markets for commodities to unfold in the new year and beyond, allowing U.S. grain and livestock producers to experience the biggest agriculture boom in history. The year and decade ahead will be historic and highlighted by climate change challenges and newly found demand from China and emerging economies."

Contact me at commodityinsite1@gmail.com for which specific commodities times are a-changin.'