Thursday, February 9, 2023
Market-Reporter
  • Home
  • Markets
    • U.S. Markets
    • Canada
    • Europe & Middle East
    • Emerging Markets
    • Asia
    • Latin America
  • Investing
    • Stocks
    • IPOs
    • Mutual Funds
    • ETFs
    • Bonds
    • Commodities
    • Currencies
    • Cryptocurrencies
  • Economy & Politics
    • Personal Finance
    • Spending & Saving
    • Retirement
    • Real Estate
No Result
View All Result
  • Home
  • Markets
    • U.S. Markets
    • Canada
    • Europe & Middle East
    • Emerging Markets
    • Asia
    • Latin America
  • Investing
    • Stocks
    • IPOs
    • Mutual Funds
    • ETFs
    • Bonds
    • Commodities
    • Currencies
    • Cryptocurrencies
  • Economy & Politics
    • Personal Finance
    • Spending & Saving
    • Retirement
    • Real Estate
No Result
View All Result
Market-Reporter
No Result
View All Result
Home Commodities

Commodities Remain a Popular Bet Despite Recent Declines

MtR by MtR
June 27, 2021
in Commodities
0


Many commodities from copper to lumber have dropped from their peak pandemic prices, easing the most acute worries about an inflationary spiral. But investors remain bullish on many of them, arguing they still look cheap.

Related articles

Record outflows from commodity ETPs obscure long-term demand

August 10, 2022

Pacific Trader: B2Gold bucks the commodity slump

August 9, 2022

Copper is down 10% from a record it hit in March. Front-month futures for corn and soybeans are off their May highs by 13% and 19%, respectively. Hogs have lost 17% this month.

Federal Reserve Chairman

Jerome Powell

recently said lumber’s dramatic arc showed how the sky-high materials costs that characterized the reopening economy were the result of supply bottlenecks and other factors that aren’t expected to last as the world’s economies move further from lockdown. Lumber futures have fallen 54% after shooting up to more than four times the average price during the most recent springs before the pandemic.

“A few months ago the consensus was that prices for commodities can’t go anywhere but up,” said

Richard Dunbar,

head of multiasset research at Aberdeen Standard Investments. “More recently, though, we’ve had a few reminders that prices don’t go up in a straight line.”

Despite the recent drop, lumber remains twice the typical price for this time of year. Copper, row crops and swine are still around their highest prices in years. Oil and natural gas, laggards of the reopening, have risen sharply to their highest levels since 2018. 

Commodity prices have presented conflicting signals to investors. On one hand, rising prices are seen as a threat to the recovery because they contribute to higher costs for goods. On the other, investors tend to pile into commodities to benefit from rapid growth and protect the rest of their portfolios against inflation. 

Investors in the coming week will monitor the June jobs report for the latest gauge of the economic recovery. Earnings from food company

General Mills, Inc.

, alcoholic beverage seller

Constellation Brands, Inc.

, and home-goods retailer

Bed Bath & Beyond Inc.

will offer a look at consumer spending habits and how companies are managing higher material costs. 

ConocoPhillips

scheduled a call with investors that could offer insight into how U.S. energy producers are reacting to rising prices. Meanwhile, the Organization of the Petroleum Exporting Countries and its oil-market allies, such as Russia, meet Thursday to consider boosting output. 

“I think we’re in the early innings of this,” said

Ed Egilinsky,

head of alternative investments at Direxion, which manages exchange-traded funds that wager on commodity futures prices. “I don’t believe it’s as transitory as the Fed is saying.”

Flush consumers, government spending such as China’s post-pandemic restocking and the trillion-dollar infrastructure bill being negotiated in Washington, and years of underinvestment in capacity are reasons some investors are bullish on commodities. Others see those factors as a signal that they might be a source of bargains.

SHARE YOUR THOUGHTS

What does the future hold for the commodities market?

Commodities tend to perform well relative to other asset classes during periods of inflation and are historically cheap compared with stocks, according to researchers at

Deutsche Bank.

Major stock indexes have soared to records over the past decade thanks to the outsize influence of technology companies that have become the world’s most valuable firms. 

“Commodities as an asset class have been out of vogue for over 10 years,” said

Jim Reid,

Deutsche’s research strategist. “Just a small rotation back in favor could have a large impact on prices.”

Matt Fine,

portfolio manager at Third Avenue Management LLC, has loaded the firm’s $663-million value fund with shares of copper miners and firms that provide services and equipment for offshore drilling, such as supply-vessel owner

Tidewater Inc.

and

PGS ASA,

which sells seismic data for ocean-bottom exploring.

Offshore drilling declined sharply during the yearslong price war between OPEC and U.S. shale producers, leaving few services companies solvent and in position to profit should there be a revival in activity at higher oil prices.

Front-month corn futures prices are off their May highs by 13%.



Photo:

Daniel Acker/Bloomberg News

“I’m not bullish on commodities, per se—except copper,” Mr. Fine said. “I’m bullish on substantially mispriced securities and the natural-resources space continues to be a place where we can be opportunistic and can still find profoundly mispriced securities.” 

One of his fund’s biggest holdings is

Interfor Corp.

, a Canadian sawmill operator that has earned record profit since last summer cutting the U.S. South’s historically cheap pine logs into high-price lumber. Interfor shares are up 174% over the past year, compared with a 39% rise in the S&P 500. This week, Interfor will distribute some of its lumber-boom windfall with a special dividend of $1.65 a share.

Lumber’s tumble isn’t all that bad for Interfor and its rivals, Mr. Fine said. They can still rake in profits selling lumber at prices north of the pre-pandemic record with less risk that exorbitant wood costs doom the housing boom and dry up demand for two-by-fours.  

Analysts are cranking out ideas for investors to capitalize on high commodity prices. 

BofA Securities suggests the Toronto Stock Exchange index. Drillers, miners, sawyers and others in the commodities business make up more than a quarter of the Canadian stock basket, compared with less than 6% of the S&P 500, and the Toronto index has traded at a steep discount to U.S. shares over the course of the current tech-stock boom.

Goldman Sachs

on Friday recommended shares of five big companies along the natural-gas supply chain, including producer EQT Corp. pipeline operator Targa Resources Corp. and liquefied natural gas exporter Cheniere Energy Inc.

U.S. natural gas futures have gained one-third since March to become more than twice as expensive as a year ago, and European gas prices have shot to multiyear highs as stockpiles around the world are burned up faster than new supplies are hitting the market. 

China, buyer of some 60% of the world’s resources, is a risk to these bullish bets. Demand from China has helped drive soybeans, corn, natural gas, coal, copper and zinc to recent highs, but lately the country has taken steps to tame prices. 

Those include efforts to curb speculation at home, and earlier this month, Beijing said it would release copper, zinc and aluminum from its stockpiles to cool prices. The move helped knock copper prices from record levels and analysts say that there is reason to believe that China will make similar moves to keep costs in check.  

“Supply can sometimes come onstream from unexpected places” said Aberdeen’s Mr. Dunbar. “People thought it would take up to five years to see much new supply but it turned out it took five minutes.” 

Demand for lumber has skyrocketed during the pandemic, sending prices to all-time highs. This video explains what’s driving the lumber boom, who’s profiting, and why those growing the trees aren’t reaping the benefits. Illustration: Liz Ornitz/WSJ

Write to Ryan Dezember at ryan.dezember@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



Source link

Related Posts

Record outflows from commodity ETPs obscure long-term demand

by MtR
August 10, 2022
0

Latest news on ETFsVisit our ETF Hub to find out more and to explore our in-depth data and comparison toolsInvestors...

Pacific Trader: B2Gold bucks the commodity slump

by MtR
August 9, 2022
0

Credit: B2Gold Corp. Hauling ore at B2Gold's Otjikoto Mine in Namibia And unlike its peers, the Vancouver company pays a...

Ford raises prices of electric F-150 pickup amid high commodity costs

by MtR
August 9, 2022
0

The all-electric Ford F-150 Lightning pickup truck is unveiled at the company's world headquarters in Dearborn, Michigan, U.S., May 19,...

Commodity Market: Gold price surge marginally

by MtR
August 9, 2022
0

Mumbai: Price of gold edged higher marginally in the commodity market. Sovereign gold is trading at Rs 38,240, higher by...

Japan Hands over Emergency Medicines and Commodities for Pregnant Women and Adolescent Girls though the Project “PROMISES” under the partnership with UNFPA – Sri Lanka

by MtR
August 9, 2022
0

On 8 August, Ambassador of Japan to Sri Lanka, H. E. Mr. MIZUKOSHI Hideaki handed over essential pharmaceuticals for women...

Load More
  • Trending
  • Comments
  • Latest

Bank of England tells ministers to intervene on digital currency ‘programming’

June 21, 2021

Tips for checking smoke alarms during daylight saving time

March 12, 2022

GLOBAL MARKETS-U.S. stocks follow Europe up; Treasury yields rise, dollar firm

July 9, 2021

What will Durham County education bonds pay for? A full list

July 8, 2022
African currencies week ahead: Zambia's kwacha seen on back foot, Kenyan shilling up – Business Recorder

African currencies week ahead: Zambia's kwacha seen on back foot, Kenyan shilling up – Business Recorder

0
Maxum Foods releases Global Dairy Commodity Update for June

Maxum Foods releases Global Dairy Commodity Update for June

0
Letter: Perpetual bonds can help states fight hunger

Letter: Perpetual bonds can help states fight hunger

0
United Kingdom ETFs Are Riding the Re-Opening Momentum

United Kingdom ETFs Are Riding the Re-Opening Momentum

0

Investment in overseas real estate surges : The DONG-A ILBO

August 11, 2022

U.S. inflation CPI report, Wall Street, currencies

August 10, 2022

Alberta oil production set new record in first half of 2022

August 10, 2022

Industrial Lubricants Market to Reach $71 Billion by 2027.

August 10, 2022

Recent News

Investment in overseas real estate surges : The DONG-A ILBO

August 11, 2022

U.S. inflation CPI report, Wall Street, currencies

August 10, 2022

Alberta oil production set new record in first half of 2022

August 10, 2022

Categories

  • Asia
  • Bonds
  • Canada
  • Commodities
  • Cryptocurrencies
  • Currencies
  • Emerging Markets
  • ETFs
  • Europe & Middle East
  • IPOs
  • Latin America
  • Mutual Funds
  • Personal Finance
  • Real Estate
  • Retirement
  • Spending & Saving
  • Stocks
  • U.S. Markets
  • Privacy & Policy
  • About Us
  • Contact Us
  • Advertise with us

© 2021 Copyright Market-Reporter

No Result
View All Result
  • Home
  • Markets
    • U.S. Markets
    • Canada
    • Europe & Middle East
    • Emerging Markets
    • Asia
    • Latin America
  • Investing
    • Stocks
    • IPOs
    • Mutual Funds
    • ETFs
    • Bonds
    • Commodities
    • Currencies
    • Cryptocurrencies
  • Economy & Politics
    • Personal Finance
    • Spending & Saving
    • Retirement
    • Real Estate

© 2021 Copyright Market-Reporter