Don’t Get Fooled by Commodity Social Media Craziness
Commodity Report #214
*YTD our absolute return strategy is up 12,3%
Don’t Get Fooled by Social Media Craziness
During the week, a good friend of mine send me a social media post that was generating some momentum online. I would like to clarify the post for information purposes:
While it may seem as a logical step to compare the current cash price with the forward futures contract, that’s unfortunately way too easy to justify such a statement. In fact, it is even miss-information.
What makes more sense is to look at the input cost factors and the forecasts for these components that the USDA is providing. Not every farmer is selling its commodities to the current futures prices. If they use futures contracts to insure their yields, most of them are usually hedged way in advance. Just think about how crazy volatile the life of a farmer would be if his entire yield was 1to1 dependent on the latest futures contract.
For good journalism, I would recommend watching this video by Johnny Harris:
The video covers the Egg Price Bubble and how the industry used the Flu Bird as a trigger event to fear consumers and create a price bubble, even as egg production wasn’t affected to an extent you would think while looking at the egg-price-chart. The video also covers how the major chocolate and sweets producer Hershey’s for example publicly stated that they were able to pass over all input-cost-increases to consumers and on top of that increase their margins.
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In Other News…
Copper prices went bananas after Trump called for a 50% tariff on imports. The premium paid for front month copper futures in New York now stands 25% above the 3-month London benchmark - great opportunities arise here for traditional commodity trading houses like Trafigura or Glencore.
I also found an interesting macro-take regarding the copper situation.
This week, look out for the following:
CPI data on Tuesday
PPI data on Wednesday
Retail Sales data and Philly Fed Manufacturing Index on Thursday
Institutional Services
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Till next Monday, Lukas
If you have any questions in the meantime, please feel free to contact me via X or Mail.