The key to cycles in commodities from extractive industries - oil, gas, metals - is investment while the key in agricultural commodities are the substitution effects at both the producer - does farmer Brown expect more profit from corn or wheat - and the consumer - chicken or steak - levels.
From FT Alphaville:
Overheard in the Long Room: the new commodity supercycles
JPMorgan is buying the decade-long dip.
Remember the commodity supercycle? While the world was getting high on incredibly loose credit between 2000 and 2009, commodity prices went absolutely bonkers. Thanks to a weakening dollar and aggressive Chinese demand, anything tangibly linked to digging things out of the ground seemed to go up, including the currencies of certain commodity-linked emerging market nations. One stat from that era for you: global M&A activity in mining and metals rose from around $10bn in 2002 to just over $150bn in 2007.
The past decade, however, has been a different story. Shale, a strong dollar, trade wars and falling Chinese consumption have — among other things — led prices to dip. Yet after the energy fallout from the Covid crisis — expressed most memorably in negative oil prices last April — are we due another cycle? JPMorgan’s Marko Kolanovic seems to think so. In a note published Monday he outlined the reasons why energy prices, and related assets, might have turned....
....MUCH MORE, including a few commenters who seem to know this stuff.
If interested see also:
