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The weakness impacting most all markets began around June 15 when the Fed raised interest rates three-quarters of a percentage point.
A few weeks ago the Fed lifted rates another three-quarters of a percentage point and the weakness continued to impact most markets once again.
For the past seven to eight weeks, markets of all kinds have been slammed hard as fears of a looming recession would weigh on the U.S economy because interest rates are being lifted sharply.
This week I wish to offer a few snapshots of a host of commodity markets and offer my opinion about where they are headed into the end of the year.
Keep in mind that what counts is what the markets end up doing and not my personal opinion. After all, no one knows for sure what any market will do, including yours truly.
Grains: The key to prices is the weather, pure and simple. The heart of the growing season has arrived and I view the weather as threatening in the United States, Grain Belt, Europe and Argentina.
It is true grain prices of all kinds have collapsed over the past seven to eight weeks, but the growing season has much more to go and the crops may yet succumb to hot and dry conditions and higher prices. Recession or not, Mother Nature can trump the Fed!
Livestock: The long-term outlook for cattle prices remains clearly bullish. In my view, it is not a matter of if cattle prices soar upward to new all-time historic highs — it is only a matter of when does the rally get underway. And this week cattle prices closed at a new, three-month and finally showing some character.
However, I am not so bullish for the hog market going into the final months of this year. In fact, a few of my most reliable contacts in the pork industry believe that a sharp decline is in store for hog futures going into the final months of this year. Can hog futures decline while cattle futures improve? Sure they can!
Petroleum: There are enough bullish issues with crude oil that I find it impossible to be bearish. But nearby crude oil prices have tumbled badly the past six to eight weeks over fears of a pending recession with front futures trading under $89 a barrel, a six-month low. My work suggests that crude is headed for $110 a barrel and possibly higher.
Crypto Markets: Bitcoin and all other similar markets have taken a bath over the past few months. But that has not discouraged the bulls. In fact, those bullish crypto markets are yelling, “HODL” — hang on for dear life.
I am not in the camp of the bulls regarding bitcoin or any other crypto market. One of the most divisive cryptocurrencies is shiba inu that in 2021 delivered a once-in-a-lifetime return of 43,888,000%. In theory, a perfectly timed investment of less than $1 would have turned into a gain of $1 million.
According to the Motley Fool in an article by Anthony Di Pizio from July 10, shiba inu is down 89% this year from its peak, now trading at $0.00001.
He writes, “but there is one unlikely path for shiba inu tokens to soar from the current price of $0.00001 all the way to $1, although it might take a little bit — OK, a lot — of time.”
In order for shiba inu to rise to $1, the number of “tokens in circulation” would have to decline from 589.6 trillion to 6.1 billion, a drop of 99.9998%.
If that took place, Di Pizio writes with conviction and clarity, “it would take a shade more than 10,270 years to burn enough tokens to reach a price of $1.”
If I were to put any serious money in shiba inu and had to wait 10,270 years for that crypto market to hit $1, my wife would kill me. There is no way she would wait that long — ha ha!
Legendary investor Warren Buffett in 2018 said on CNBC News that cryptocurrencies “will come to a bad ending” and said that Berkshire Hathaway will “never have a position in them.”
“I get into enough trouble with the things I think I know something about,” he said at the time.
A few months ago Buffett was also quoted as saying, “If you owned all of the bitcoin in the world and you offered it to me for $25, I wouldn’t take it because what would I do with it? I’ll have to sell it back to you one way or another. It isn’t going to do anything.”
He described his views on farmland and rental properties versus bitcoin as “the difference between productive assets and something that depends on the next guy paying you more than the last guy got.”
Farmland: I am quite bullish farmland for obvious reasons. And to paraphrase Mark Twain who once said, “buy farmland — they’re not making it anymore.”
Summary
I am bullish on all U.S. ag markets, food markets, petroleum and farmland. I am bullish on those markets even though fears of a recession for the past six to eight weeks have weighed on values.