The commodities fall is near “exhaustion” with wheat, rice and coffee set to rebound, according to Shawn Hackett, president of Hackett Financial Advisors in Florida.
The Bloomberg Commodity Index of 22 raw materials closed on Friday at the lowest level since August 2002, capping an almost 30 percent decline in the past year. Wheat dropped 25 per cent in the past 12 months and rice fell 30 percent. Arabica coffee slipped 37 per cent as Brazil’s weak real currency encouraged exports, adding to supplies.
“For speculators wheat and rice are the two markets that are the ones to buy given that both have the lowest supplies relative to global demand,” Hackett said in an e-mailed report on Saturday. “Once the panic selling in commodities subsides and the real stabilizes, coffee prices should go back up at a blistering pace. The next 30 days should offer that scenario.”
Cocoa prices have dropped 3.2 per cent this year and are still “an incredible short,” or likely to fall more, Hackett said. “Should underlying support break as I expect it will, the cocoa crash should be epic.”
In livestock, hogs are “getting cheap while cattle remain overvalued,” he said. Live cattle futures climbed 6.1 per cent in the past year, the only item in the Bloomberg Commodity Index to gain over the period. Lean hogs slumped 41 per cent.
Hackett also recommended selling milk futures for September through December delivery where prices are above $17 per hundredweight. “It is important to keep emotions under control and remain focused on the prize of buying when there is ‘blood in the streets’,” Hackett said. “Those that did that in 2008-2009 and bought commodities are retired now.”
Bloomberg News, edited by ESM