That was the overall sentiment of analysts at the Dow Jones Indexes Mid-Year commodities outlook held Tuesday morning on the grain floor of the Chicago Board of Trade.
David Hightower, president and founder of the Hightower Report, joked that various pundits have cited 10 commodity bubble bursting events in recent years; he is not one of them. “We don’t see the factors that bring about a market top,” said Hightower who was commenting on the grain markets. “We don’t have high enough prices…we have to move to higher prices, demand has not been pushed back.”
One market where price has risen to the point of affecting demand is crude oil.
Phil Flynn, Alaron energy analyst and a consistent energy bull over the last decade, believes that for the first time in many years the price of crude may have hit a top and next year’s high will not exceed the current year’s high.
While in the past Flynn has pointed to global economic growth and demand pushing oil higher, he says, the near doubling of crude prices from last October when the Federal Reserve cut interest rate by 50 basis points had a different dynamic. “[People] bough oil as a hedge against systemic risk. [They were] buying oil as a currency of last resort.”
Flynn expects crude to dip back below $100 this year and noted that there are signs of reduced U.S. demand.
All the analysts saw Congressional proposals to limit investments in commodities as a bad idea and counter productive. Flynn said such a move could be dangerous and lead to gas lines and move markets overseas.
Hightower said restriction on investing in commodities “would make shortages more acute in the future.” He added, “Stopping speculation would not stop China from eating or make India go back 25 years.”
Charles Nedoss, senior account manager for Peak Trading Group, noted that the Minneapolis Grain Exchange (MGEX) corn and wheat indexes, which are financially settled and tend to track the cash market, have been correlating closely with the CBOT grain complex. That is an indication that the market forces are the driver of grain prices not over speculation, according to Nedoss.
John Prestbo, editor and executive director of Dow Jones Indexes said of the proposals to restrict commodity investing, “I am an optimist; I am hopeful that cooler heads will prevail.”
Tags: Commodities, supply and demand
