Everyone is talking about gold, silver, oil and corn. But the biggest loser is wheat, down more than 35% over the past 6 months. The decline is due to record yields around the world (bumper crops), specifically in europe and the Ukraine. After you factor in our freight costs to ship there, our wheat simply isn’t competitive.
Couple that with the fact that the US dollar is soaring, up 8% versus the Euro over the past 3 months, and that my friends is a recipe for FARMTASTROPHE.
Like coffee in 2013, I believe wheat will bottom out here and offer 40-70% upside, once the weather Gods even the score in 2015. The ag trade is always an emotional one, with wild gyrations based off the dumbest news clippings. But one thing is for certain, American’s love some bread and the dagos in Italy adore pasta.
The long wheat trade can be taken if you think the run in the dollar will abate, which is another topic up for debate. There appears to be signs of scarcity in the money supply, showing up in surging dollars and depressed yields. If the Fed is going to raise rates, well then, why aren’t rates going up? Perhaps it’s because any semblance of tightening is detrimental and deflationary for this economy, as suggested by recent trends in oil, gold, silver and wheat prices?
Strong dollars means our exports are less attractive. For a country that built its economy around the global trade phenomenon, a strong US dollar doesn’t exactly spell tailwind.
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FARMTASTROPHE needs to be added to that Merriam-Webster book with all those words.
http://www.zerohedge.com/news/2014-09-24/hugh-hendry-not-having-good-year
The Hugh Hendry illustrates brilliant, rational, logicial, well-said intellectualism does not = market results/performance/returns
Knowing what’s going on in the world doesn’t get good investment returns, knowing what other people think is going on in the world does.
Been eyeing $WEAT but had taken a position in $WOOD, thoughts on the woody play?
I would imagine our friend Chess wouldn’t care if WEAT went to zero. The man is solely fueled by raw beef & cocoa nibs.
+1
is the dollar holding back the shipping rates?? They are 30% of where they were one year ago. Of course I try to get in front of the seasonal pop and it doesnt come – wtf
paleo diet….wheat left in the dust.
How is it that this blog post could be so valuable and knock me off my chair funny at the same time?
making good $ shorting emerging markets and small caps. imho gl all
Senor Fly there is a certain little girl on the teevee that will not complete a fucking sentence. It is maddening listening to the never ending “but, therefore, by the way, as it should be, and so, and then, as there, because, still, however”. Make it stop!
Kayla Tausche?
When a cow orker they like to preface it with “our own…” That, and when they say “the __’s of the world.” It gets tired.
Prolly less tractors will be bot this winter.
buy NUGT. the Fly is FINALLY smartening up. Rates are going nowhere and the dollar is about to get an epic smackdown. Dollar move is akin to 2000 dot com stocks – watch how this corrects
scarcity of dollars???? LMAO. just look at the Fed balance sheet. The dollar strength has been a manipulated move to economically shock Russia
None of the Fed’s balance sheet has made it into the economy
Fly is a joke
Like a Jack in the Box joke with a knife.
S&P only off 1.8%…avg 3 ‘pullbacks’ a year of 3%(+/-1.5%)…
Market whack action…. TLT’s looking nice today…
buy all NUGT dips – closes at 27
We should have seen this coming. The Canada Wheat Board was a producers cooperative that heavily influenced prices upward. The Canadian Gov’t demolished it last year which fully exposed the price of wheat to competitive pressures, contributing to the current drop in prices.