Red-Hot Resources

"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Thursday, March 13, 2008

Hotter than $100 Oil?

I sent this analysis to some friends in the "biz" last night, so I thought I'd share it with you ...

Most investors – and consumers -- have their eyes glued to the price of oil as it heads higher and higher. But here’s something you may not know. Since the beginning of the year, most of the OTHER commodities in the 19-member Reuters/Jeffries CRB Index have outperformed oil.

See for yourself – crude oil is #11, behind #10 gold and #9 sugar. The top three performing commodities this year have nothing to do with energy – Wheat, Cocoa and Silver.

In fact, most commodities are on a rampage thanks (in part) to the sinking US dollar. The U.S. dollar index, which compares the greenback to the world's major currencies, has fallen about 15% this year and is near its lowest levels ever. Recession fears are driving the greenback lower as jobs disappear, home prices fall and consumer confidence plummets.

Since commodities are priced in dollars, the sinking greenback causes foreign buyers to swarm in to buy commodities at what they see as “cheap” prices.

There is no better example of this than wheat. Wheat prices have tripled in the past two years, rising on the back of soaring foreign demand …
The USDA cut a month-old forecast on inventories by 11% because of rising global demand. The USDA says that by May 31, 242 million bushels of wheat, or 6.6 million metric tonnes, will be in storage. That sounds like a lot, but that’s down from 272 million metric tonnes projected last month, and down 47% from a year earlier.
The USDA is expecting exports to hit 33.3 million tonnes in the marketing year that began June 1, up 2.1% from the February estimate and 35% higher than a year ago.
And that figure might be raised again. Advance export sales of US wheat are up 54% from a year earlier, while actual shipments are up 52%.

Where is all the grain going? We’re selling it to the world. Heck, if there was an OPEC of grain, the US would be Saudi Arabia!

Good luck and good trades

Labels: , ,

Check out my new gold and energy blog at