January 18, 2022

Commodity Insight: News & Views

Agriculture continues to make headlines. Here is some of the latest farm industry news:

• Reuters: “The United States will issue new rules and $1 billion in funding this year to support independent meat processors and ranchers as part of a plan to address a lack of ‘meaningful competition’ in the meat sector, President Joe Biden said on Monday (Jan. 3). The initiative comes amid rising concerns that a handful of big beef, pork and poultry companies have too much control over the American meat market, allowing them to dictate wholesale and retail pricing to profit at the expense of their suppliers and customers.”

• Business Insider: “Legendary investor Byron Wien said gold will rally 20% in 2022 in his closely watched ‘surprises’ newsletter. He predicted investors will turn to gold for safety, as the S&P 500 wobbles and inflation stays hot.”

• CNBC: “Investors continue to pour cash into the stock market, lifting equity prices to record levels. Stronger-than-expected economic data and massive fiscal and monetary policy support have contributed to the euphoria for publicly traded equities, particularly those of tech-focused, growth-oriented companies. Free, easy money has encouraged investors to take on more risk as growth is one of the few ways to generate return in a 0% interest rate environment. However, cautionary signals are flashing, and they call to mind the bursting of prior bubbles in which investor optimism exceeded investment fundamentals. No one can predict with certainty when a market correction will occur, and bubbles can persist for extended periods. Focusing on diversification and avoiding excessive concentration is the only surefire way to protect against sudden and severe market declines. Investors seeking diversification may want to consider shifting a portion of their public equity allocation into private equity, private credit, or certain hedge fund strategies.”

• Drovers: “Optimism is building in cattle country that 2022 will finally deliver a long-anticipated bull market for cattle. Ranchers and cattle feeders saw markets turn higher in the final weeks of 2021, and while many of the challenges facing the industry last year will continue, most analysts suggest improving prices are a trend that will continue beyond this year.”

• “In locked down Chinese city, some complain food hard to get” — Associated Press: “Residents of the Chinese city of Xi’an are enduring a strict coronavirus lockdown, with business owners suffering yet more closures and some people complaining of difficulties finding food, despite assurances from authorities that they are able to provide necessities for the 13 million people largely confined to their homes.”

• “Commodities Gained Across the Board in 2021. Gold Was the Exception.” — Barrons: “Anyone wanting a calm commodities market in 2021 would have been disappointed. It produced surprises that would have shocked even the most jaded market veterans. Wheat, coffee, sugar, lumber, and energy prices all shot up. Perhaps most shocking was that the price jumps were driven by different factors. It wasn’t all upward: gold puzzled some investors, as prices slumped even while inflation surged.”

• CNBC: “Private job growth totaled 807,000 for the month, well ahead of the Dow Jones estimate for 375,000 and the November gain of 505,000 according to ADP.”

• Investopedia: “The Phillips curve is an economic concept developed by A. W. Phillips stating that inflation and unemployment have a stable and inverse relationship. The theory claims that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment.”

• Commodity Insight: “I cannot recall a year with so much upside potential for grain and livestock prices as the year ahead. And all because the world still has supply problems that carried over from last year at this time.”

• Commodity Insight: “The head of Goldman Sachs commodity division says the best place to be now from a market perspective is in commodities. Not stocks, bonds or cryptocurrencies, but commodities. I couldn’t agree more.”