Goldman Changes Views on Commodity Markets // Farmer Income Gets Worse

The Commodity Report #171

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Goldman Changes Views on Commodity Markets

Last week, the investment bank Goldman Sachs shared a memo with clients in which it stated that it changed its medium-term view on commodity markets.

“Tactically, we close our 2024 Deficits Basket recommendation with a potential 8% gain and focus on our highest conviction views in the current environment, namely higher implied oil volatility, long gold and short long-dated European natural gas”, the bank wrote in its memo.

As a fundamental reason for that viewpoint change, the bank named “a softening of cyclical support to commodities ”that led Goldman to a “more selective tactical approach” to commodity investing.

If you ask yourself what the Deficit Trade was, here is the answer:

• LONG GSCI energy ex US natural gas

• LONG GSCI industrial metals ex nickel, zinc

Goldman said that China's data surprised the downside this summer and suggested weakening cyclical support to commodity demand, particularly oil/copper. “It is difficult to build deficits without strong China demand” the bank stated.

Speaking about copper - Goldman expects “the sharp copper inventory depletion we had expected will likely come much later than we previously thought. Accordingly, we delay our end-2024 copper target of $12,000/t to post-2025, implying a 2025 copper forecast of $10,100/t, still above this YTD’s $9231/t, but well below our previous $15,000 expectation.”

Their preferred LONG target in the commodity space currently is gold, with a price target of $2.700 USD for 2025.

Farmer Income Gets Worse PART II

The August latest Ag Economy Barometer showed that farmer sentiment continues to fall. The index dropped 13 points from July to a reading of 100, echoing levels seen from fall 2015 to winter 2016 during the early stages of a significant downturn in the U.S. farm economy.

The Index of Current Conditions also dropped 17 points to 83, while the Index of Future Expectations decreased by 11 points to 108. Weakening farm income prospects weighed on farmers’ sentiment, as the outlook for a bountiful fall harvest was more than offset by declining crop prices.

August’s survey results indicate a shift among farmers’ primary concerns, with 30% of respondents identifying lower commodity prices as their primary concern, compared to 33% who cited high input costs.

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In Other News…

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This week, look out for the following:

• CPI data on Wednesday

• USDA’s WASDE Report on Wednesday

• PPI data on Thursday

• University of Michigan Consumer Sentiment on Friday

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sample idea - cotton - from Kuemmerle Report - 21.07.24

A subscription costs $29 a month, and you will receive an additional in-depth report called “The Kuemmerle Report” every Sunday evening at 6:00 PM CEST. The report covers all liquid commodities, like in the sample above visualized. On top of that you get our takes on weather patterns as well as our latest economic outlook. That information will only be published to members and not the general public.

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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.

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