About soybean oil, grains and container vessels
Commodity Report #36
The benchmark, Bloomberg Commodity Index, ended the week 1,75% higher.
The energy sector was mixed with all oil-related products higher again — while natgas prolonged its seasonal selloff. Grains and softs were also higher — based on the fear of high fertilizer prices and reduced production. Meanwhile, the worsening shipping crisis, as well as bad weather forecasts for Brazil, once again pushed most soft commodities higher.
Crypto wasn’t able to defend important technical levels and is now in a serious bear market again. Meanwhile gold, silver, platinum, copper and palladium were last week’s biggest winners — as they worked as a safe haven in the midst of a serious stock market selloff.
Here is my latest playbook:
The shipping crisis is still getting worse (but differentiate)
Bulk carriers, container ships and tankers — those are the three important kinds of vessel transportation that you need to differentiate.
While the cost of bulk shipping (measured f.e. with the BDI) was coming down sharply and is now back below pre-covid levels, the cost of container transportation (measured f.e. with HAPEX) is still surging and there is currently no end in sight. This justifies the current “high” soft commodity prices — while many grains actually should be weaker because of a declining BDI.
Soybean Oil and the correlation to crude as well as palm oil
Over the past five years, the correlation between crude palm oil futures from Malaysia and soybean oil futures was the most visible.
But since 2021 the correlation between crude oil and soybean oil is even more significant.
Also, note that soybean oil is mostly transported by shipping containers! IMO the worsening situation and the higher cost of container transportation are directly related to the price surge in soybean oil!
Bitcoin pfui — Gold hui
While digital gold Bitcoin is losing important technical levels to the bears — the “old” gold is actually remarkably stable. In an environment where Realyields are getting less negative — that’s actually surprising. But maybe it has something to do with flows getting out of bitcoin and into gold — or it just has to do with the risk-off environment and gold as a safe haven. I don’t trust this strength unless gold makes a higher high and breaks 1.870USD
Grain optimism is now clearly overdone IMO
Grains were surging over the past week, mostly based on the fear of lower production because of high fertilizer prices. While this might be true over the short term, the general fear is overdone — because fertilizer prices are currently rolling over to the downside, as explained in this member report. The cost of shipping the product has come down dramatically over the last weeks and therefore grains are IMO currently priced very very optimistic.
Meanwhile, the commercial positioning picture is also pointing towards too much optimism in the space right now. I see the opportunity on the short side, especially for soybeans and corn — but not so much for wheat.
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Make or break time for crude oil
In this week’s member report, I will analyze the current crude oil situation and how I will trade it on the short side. There are many variables investors and speculators need to observe right now but actually, my data speaks a clear language right now. I will give you a comprehensive overview of the technicals and fundamentals in the oil market, where the opportunities and the risks are — and how I’m trading the setup.
Pro tip — If Jim Cramer tells you to buy oil-related stocks, you should ask yourself about sentiment.
If you haven’t done it by now — consider subscribing to the weekly commodity report to get updated about the most important developments in the commodity sector every Monday morning. (for free)
US Dollar Update — make or break time (again)
The expected correction in the DXY continues — currently, we’re trading in nowhere land. The yield spreads still advocate a prolonged dollar rally. I’m waiting for another breakout to either side here.
Elsewhere In The Macro World
Deflation is on the horizon — yes you read right :D
This great chart by the brilliant @MacroAlf shows that the G5 credit impulse is now screaming 1% inflation by Q422!
Already got any bonds?
This week look out for:
- Manufacturing and Service PMI on Monday (slowing economic growth environment?)
- It’s FOMC week! On Wednesday Powell will speak to the public about how to contain inflation (even while he has no influence on the underlying drivers of the current inflation surge…)
- Quarterly GDP update on Thursday
- Core PCE Price Index on Friday
Coming up in tomorrows Member Report:
The current setup in the oil market (opportunities and risks)
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