In the News - February 2008
Investors bullish on commodities for foreseeable future
LITTLE ROCK - Investors worldwide are bullish on commodities and for good
reason. Continued strong global growth has created a global bull market for
them, according to Dr. Bobby Coats, agricultural policy analyst with the
University of Arkansas Cooperative Extension Service.
"The question now becomes if robust global growth will be derailed by the
turmoil in the housing sector, high oil prices, struggling equity prices and
reduced consumer spending in 2008," he said.
While these issues are serious and have injected substantial uncertainty into
the 2008 economic setting, Coats doesn’t expect the global bull market in
commodities to be derailed anytime soon.
The U.S. and other progressive economies around the world are focused on
providing financial stimulus to a slowing global economy.
Their objective, Coats said, is to limit the downside of global growth and
limit the loss of economic momentum. He expects the stimulus to enhance global
growth and the demand for commodities. The cost of the financial stimulus will
be increased inflation, Coats said.
Global stimulus, weak dollar, inflationary setting, the alternative fuel
movement, globalization, commodity shortages and weather problems all point to
commodity pricing opportunities for farmers.
Coats said many of these same factors that give markets their pricing
potential would produce dangerous levels of price volatility.
"I only recommend being in these markets with a professional marketing
assistance," he said. "Why? You simply need a professional to plan for managing
the unexpected."
What’s the outlook for row crop prices?
Coats said, the price trend remains up for row crops. Cotton is the biggest
disappointment. It looks to show some prices weakness into planting season, and
this will further reduce Arkansas and U.S. acreage, which in turn will be
bullish for cotton prices. The larger price trend for cotton is still up.
Wheat, rice, corn and soybeans are still showing price strength, but at some
point they will correct.
What’s the outlook for oil prices?
The demand for oil is at an all-time high, Coats noted. He said oil prices
are up almost 800 percent since their 1998 low of $10.35 and up 75 percent from
last year.
"I expect to see more weakness than strength in oil prices over the next
eight months," the economist said. "I expect slowing global growth and other
issues will provide some oil price relief."
For more information on economic issues, go to www.uaex.edu
and select Radio/Podcasts. The Cooperative Extension Service is part of the U of
A Division of Agriculture.
February 15, 2008
Media Contact: Lamar James
Extension Communications Specialists
U of A Division of Agriculture
Cooperative Extension Service
(501) 671-2187 or (501) 753-0207
ljames@uaex.edu
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