breitling watches

Fancy charts and fundamental analysis weren’t necessary to spot the trouble facing commodities this spring. A couple of headlines were all that was needed.

On Thursday, investors were said to be selling commodities because they didn’t need bets in risky assets thanks to gains from a booming stock market. On Friday, those same investors were supposedly selling commodities due to fears of slowing global growth.

Whatever the reason, commodities appear to have fallen from favor. That could have a significant impact on recovery hopes in the grain market, depending on how fundamentals of supply and demand play out this year.

Friday’s Commitment of Traders showed speculative hedge funds selling corn, soybeans and wheat. They’ve been net short in wheat for a while but also assumed that bearish bent into last week’s USDA report. The more positive numbers from the government may have encouraged the big players to reassess their newfound negativity in crops. But the dark mood remains over commodities in general.

Gold was the biggest loser. The government of Cyprus will reportedly be selling some of its reserves, but the precious metal’s collapse – it fell more than $100 an ounce last week – looked like if not a surrender, at least a strategic retreat. Japan’s aggressive move to weaken its currency though the same brand of quantitative easing championed by the U.S. Federal Reserve is a desperate attempt to avoid deflation. For all the talk of inflation caused by deficits and debt, what central bankers really fear is an economy that can’t even generate modestly rising prices.

Someday, all these fiscal chickens may come home to roost. But for the moment, investors aren’t worried about them.

Gold wasn’t the only benchmark commodity suffering. Crude oil and copper are also working lower. Indeed, the CRB index made new lows last week, reaching its weakest reading since the bull market in grains took off last summer.

While investors soured on commodities, equities are the rage, at least for U.S. stocks. The S&P 500 Index finally followed the Dow into record territory last week, despite a weak March jobs report and minutes from the Fed that appeared to suggest at least some central bankers are moving closer to ending their massive injections into financial markets.

Some of the trillions created by the Fed have worked their way into the both stocks and commodities. But so far, it’s commodities that are suffering from expectations the Fed will take away the punch bowl, perhaps sooner, rather than later.

The dollar has sold off some of its gains from Japan’s foray into financial easing. But bonds have stayed near their recent highs. That suggests investors don’t really expect higher interest rates any time soon, even if the Fed stops buying bonds and other term debt.

The prospect for rates to stay low could be crucial for farmers. Strength in farmland prices has been built in part on the low interest rate environment of the last five years. Rising rates, coupled with falling crop prices, would be a severe test for land values.

Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Advisor. He conducts Farm Futures exclusive surveys on acreage, production and farm management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key farm crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.