Today, analyst Dennis Gartman discussing the current mini-boom in commodities.
While the falling dollar is one factor driving prices up, Gartman notes that there is an abundance of corn available. Lots of corn. And it must be sold as soon as possible.
COMMODITY MARKETS ARE STRONGER EVERYWHERE… with prices rising as the dollar weakens; however, just as we see the dollar’s weakness noted above as corrective rather than bearish, we see the strength in the commodity markets in the same light. Given the severity of the recent weakness, a bounce is not only overdue, it is almost necessary, in order to restore health to the market. After all, the DJ/UBS Index has fallen from 145 to 129 in the course of the past four weeks, breaking a well defined upward sloping trend line extending back into March of last year in the process. Indices such as this do not fall 11% in such a short period of time without bouncing.
Turning then to the non-metals, we note firstly that lumber has gone “limit up” two days in a row. Perhaps this is nothing at all. Perhaps it is simply a short squeeze in the lumber pit; or perhaps there was some change in the myriad US/Canadian lumber agreements that we know nothing about; or perhaps this is the lumber market’s signal that the housing market is indeed turning for the better. We are open to suggestions, noting only this market’s strength and wondering aloud what is to come of it.
Moving on to the grains, weakness still prevails and corn continues to be under the impetus of the still fresh-in-our-memory USDA crop report of nearly a month ago. Perhaps most importantly for the corn market, however, is the fact that so much of the corn crop was gathered in far too swiftly and was brought in “out of condition” and may soon go out of condition entirely. This corn must be sold, and it must be sold quickly. Farmers really have little choice. It is sell now, or sell nothing. They’ll take now rather than nothing. How much corn there is to be sold in this instance is open to debate but it is somewhere between 200-500 million bushels. Once this corn is sold, then perhaps corn prices will find a base, but until then there is substantive overhead supply and prices will likely trend lower still, on into the next round of USDA crop reports next month.