Understanding the Secular Shift of Capital into Commodities

Higher prices can happen even if the economy slows further
Tuesday, July 16, 2013, 9:27 PM

Executive Summary

  • The commodity complex is already beginning to rise following oil's upside breakout
  • Natural gas is trending higher
  • Copper appears to have bottomed
  • Wheat and coffee's downtrends are ending
  • A secular rise in commodities can happen even in the face of slower economic growth and lower demand

If you have not yet read Part I: Get Ready for Rising Commodity Prices available free to all readers, please click here to read it first.

In Part I, we examined the conventional narratives used to explain the price of oil and found that they no longer account for oil’s breakout to a new uptrend.  I suggested that financialization and speculation could power oil much higher, despite sagging global demand for physical oil and a potentially deflationary global recession.

This thesis has been met with widespread skepticism when I’ve aired it privately, and I think this skepticism arises from the newness of this narrative. In the past, oil has responded to supply-demand and inflation/deflation. The notion that oil could rise in a finance-induced “scarcity amidst plenty” is neither simple nor intuitive.

If oil tracks higher, we can anticipate that the primary commodities (energy, agricultural, and construction) may well rise, even as end-user demand weakens, as oil underpins all production and transport. The 2.5% rise in producer prices over the past year suggests this is already occurring.

The secondary reason is that lower prices eventually push marginal producers out of business, tightening supply and giving the remaining producers pricing power.

As noted in Part I, regardless of what we see as key drivers or what we think oil “should do,” oil has broken out technically.

Is there any evidence to support the idea that the uptrend in oil will trigger higher prices in other commodities? Let’s start with the CRB (Commodity Research Bureau) index that reflects a basket of commodities... » Read more

Featured Discussion

GMO Contamination of the Food Supply?

GMO Contamination of the Food Supply?

Monsanto's unapproved genetically-engineered Roundup Ready Wheat detected Oregon cropland

Daily Digest

Image by Leonid Mamchenkov, Flickr Creative Commons

Daily Digest 4/17 - Cyprus Braces For Russian Exodus, Half NYC Workforce On Food Stamps

Wednesday, April 17, 2013, 2:37 PM
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  • Smithsonian to close galleries due to budget cuts
  • Three-fold increase in demand for Gold: Jewellers
  • Bailouts push German debt to new record
  • Italy's temporary layoff scheme runs out of cash, sparks protests
  • Almost half of NYC workforce on food stamps
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What Should I Do?

Barley Fodder Feed Mat

Reflections on Using a DIY Fodder System

Lessons learned from home-grown fodder
Monday, April 8, 2013, 7:30 PM

Growing fodder for animal feed is starting to catch on, and many homesteading families and small farm operations are exploring the possibilities of what this type of feed can do for the health of their animals and cost of feeding them.  If you haven’t yet read the first two articles on growing fodder and building a simple DIY fodder system, you can find them here: http://www.peakprosperity.com/blog/growing-sprouted-fodder/72618 and here: http://www.peakprosperity.com/wsidblog/80359/diy-home-fodder-system.

It has been a few months since I wrote the DIY fodder system article for Peak Prosperity.  It turns out that a lot of people are interested in growing their own fodder, as this article has been extremely popular.  With the combination of all of the valuable feedback (thank you!) and a few more months of experience, we have some additional thoughts to share. » Read more

Daily Prep

Einkorn Wheat

A look at an ancient wheat
Monday, June 25, 2012, 10:07 AM

Learn about Einkorn Wheat and discover the different qualities this ancient wheat has over its modern modified relatives.

History of Einkorn | Types of Wheat: Nutritional Content & Health Benefits Comparison  | Nutrition of Einkorn

What Should I Do?

Food Storage Made Easy

Visit a Mormon cannery
Sunday, March 27, 2011, 12:43 AM

The events in Japan - stripping grocery shelves and leaving thousands of families without food, water, electricity, or sanitation - provide us with grim motivation to assess our own levels of personal resilience. How prepared are you if a similar disaster (natural or man-made) were to suddently strike where you live?

I, for one, still have more gaps than I would like. Like many folks, I've been genuinely intending to get around to filling them soon, but noble plans have little value the moment after the unexpected occurs. As Chris often says, it's immeasurably better to be a year early with your preps than a day late. » Read more