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Commodities Aiming To End 5 Years of Decline

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Commodities Aiming To End 5 Years of Decline

Commodities are close to breaking away from a five year streak of yearly losses. 

Analysts are saying that this increase we’ve seen over the past six months is probably going to continue throughout the remainder of the current year. 

However, some analysts are not expecting the gains to be as incredible as the ones experienced in the past six months.

Positive gains have been seen by:

  • Sugar
  • Lean Hogs
  • Crude
  • Gold

The largest decliners have been:

  • Cattle
  • Coal

The following graph shows where they stand as of July 2, 2016:

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What Does This Mean for The Future?

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According to Adam Koos, it is believed that commodities are going to continue this increase in performance over the remaining half of the year.

Koos further stated that goods had been grouped together in a laggard class for assets for an extended period. 

He says that it was possible we would see them in first place eventually. 

Koos stated,  “I think that time has come and it’s early yet, so investors shouldn’t feel as if they’ve missed the party.”

The moves are the mark of a turnaround. 

This particular asset class saw its largest loss experienced since the year 2008 at the end of 2015.

One commodity-price index that has a lot of diversity is called the Bloomberg Commodity Index.

 It has risen nearly 13% this year after it had declined for 5 years in a row, losing 25%. 

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YTD Numbers?

Sugar had risen 39.6% last Wednesday. 

According to Factsheet, both Brent crude and lean hogs saw advancements. 

Both gold and WTI oil also saw rises. 

Live cattle were among those that performed the worst for the year, losing a total of 16.5%. 

The following chart shows these numbers:

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Rob Hawthorne states that commodity markets have seen challenging times recently. 

He also says that most areas may have reached this cycle’s bottom level.

Hawthorne further says that there doesn’t see anything to justify being to quote, “bullish” for the commodity market for the remainder of the year.

Prices have been exceptionally volatile the past few days due to news of Brexit:

Here are some of the essential commodities. 

Also added are a few predictions for where they could potentially move next:

Hogs and Cattle Are Opposing One Another

The future of live animals and the future for lean hogs are currently performing on opposite ends of the spectrum.

The current shortage of supply of pork in combination with a rise in prices in China has something to do with an increase for the future of lean hogs. 

However, both the numbers for pig and the production of pork are expected from the summer to next spring by a significant amount. 

In fact, it is anticipated to be the largest seen since 2009.

This suggests that the rise could be limited, according to David Maloni.

Live cattle have declined. 

From 2010 all the way through 2014, live cattle managed to enjoy significant price gains. 

This provided producers the incentive that they need for them to boost the number of livestock.

Maloni stated that:

  • Improvements have been made in the supply of cattle thanks to forage conditions being better.
  • That these improvements have been thanks to cattle prices that have been elevated historically over the past few years.

U.S. beef was priced out of the world market earlier this year with a U.S. dollar DXY-0.34%.

However, the greenback’s recent weakness could only have helped the demand for beef in the U.S.

Exports for Australia are also very likely to see a slowdown.

According to Ned Schmidt, supplies have been drawn down the past couple of years thanks to sales to China being strong.

Oil

Oil prices, over the past couple of years, have seen massive declines. 

However, some producers are welcoming a rebound in prices.

This year, some of the biggest gainers have been Brent Crude and West Texas Intermediate. 

Both experienced drops of more than 30% last year. 

According to Fawad Razaqzada, this caused shale producers not to see a profit this year from pumping oil.

Razagzada is employed by Forex.com as the chief technical analyst. 

He further stated that production outages that were not scheduled, the dollar in the U.S. losing value, and a high demand further supported the rally.

The following oil products have also climbed:

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The future for both heating oil and gasoline have seen a 20.4% and a 36.5% rise. 

Phil Flynn reports that the numbers for heating oil are especially note worthy.

Flynn further stated that the higher movement is a reflection of the fact that a few of the horrible scenarios faced by the global economy have not played out. 

He also says that demand has seen better days.

Razaqzada expects the future for products that are not oil to continue with their high production rates and come online once again in regions in which outages that were not scheduled were experienced. 

Iran still increases the market share it holds for oil.

However, oil prices are said to gain support continuously.

During the next part of the year, however, the probability is that crude supply is going to see more decreases. 

It is also probable that the Fed is going to push back it’s timing for raising interest rates.

This push back is said to ensure that the pressure remains on the amount of the dollar.

Razaqzada is also skeptical about the UK leaving the EU causing a massive catastrophe in the economy that will have an impact on how much oil is demanded.

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