Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Amid Talk of a Supercycle, Some Commodities Wipe Out 2021 Gains

CommoditiesJun 17, 2021 14:42
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.

(Bloomberg) -- For all the talk of a possible supercycle in commodities, some have wiped out gains for the year and several more are close to doing so.

Soybean futures have erased their 2021 advance, and are down more than 20% from an eight-year high reached in May. Corn and wheat have also tumbled from multiyear highs, while nickel, sugar, cotton and even lumber have stumbled recently. Gold, platinum and silver are down for the year.

While raw materials such as oil that benefit from reopening economies are still flying high, gains are ebbing on an improving supply view for some, such as soybeans, and concerns over demand in others, such as silver. Many also took a hit on China’s efforts to slow inflation and Federal Reserve signals for interest-rate increases, with the dollar rising and the Bloomberg Commodity Index set for its worst week since the start of the pandemic.

“Risk-off is front and center thanks to the hawkish words from the Fed, which came on the back of the Chinese government-led directives over prior weeks,” said Michael Cuoco, head of hedge-fund sales for metals and bulk materials at StoneX Group. “Central-bank stimulus helped the markets gather steam in the spring of 2020, and now there is a bit of a macro reset.”

The cool-down in many raw materials comes after the Bloomberg commodity gauge reached multiyear highs. Analysts including those at Trafigura Group have said tight supplies and rampant demand point to the possibility of another supercycle -- an extended period during which prices are well above their long-term trend.

A gauge of the dollar extended gains on Thursday after climbing the most in a year on Wednesday, making commodities less appealing to investors holding other currencies. A big backwardation in many commodities and seasonalality accounts for some of the recent slump as futures contracts roll over.

China Campaign

China has stepped up its campaign to rein in prices and reduce speculation in a bid to ease the threat to its economy from soaring raw-materials costs. The country’s top economic planner on Thursday reaffirmed its intention to cool commodities, and said it will release metals from state reserves in a timely manner to push prices back to a normal range.

Also hurting prices of many agricultural products has been improving weather in growing regions. Recent beneficial rains have corn futures on track for the steepest monthly decline since 2011 and for soybeans since 2016.

“The volatility we are seeing now is all about weather,” Stephen Nicholson, a senior analyst for grains and oilseeds at Rabobank, said in a phone interview on Thursday. “Over the last few weeks you just get whiplash from day to day.”

The slump in many resource prices deepened this week after Fed officials sped up their expected pace of policy tightening, fueling worries that the U.S. central bank would soon pare stimulus that’s helped spur stellar gains in metals, agriculture and energy.

Still, energy and industrial metals, which have gained from bets that reopening economies will stoke demand, are still well above where they started the year, and some analysts say the rally is unlikely to fade significantly.

“We believe we are in the early innings of a decade long strong cycle in commodities, similar to the cycle that took place from the late 90’s through 2008,” said Jason Bloom, global market strategist for Invesco, which oversees $1.4 trillion assets for clients. “The supply constraints are relatively insulated from the language of the Fed in a given meeting. China can push around prices in the short-term by releasing reserves, but they don’t control markets.”

©2021 Bloomberg L.P.

 

Amid Talk of a Supercycle, Some Commodities Wipe Out 2021 Gains
 

Related Articles

Crude Oil Edges Lower at End of Volatile Week
Crude Oil Edges Lower at End of Volatile Week By Investing.com - Jul 23, 2021

By Peter Nurse    Investing.com -- Crude oil prices edged down Friday, holding above $70 a barrel and only marginally lower on the week after riding out a series of negative...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email