We have to predict a major agricultural and financial juncture just ahead.
Economic skies continue to brighten as some of the most troubled areas of the world (the Euro zone and Japan) are beginning to show some improvement and the only major nations that appear to be degrading are Brazil and Russia.
A number of central banks have implemented fresh easing efforts, German and European economic prospects have shown some minor improvement, and the prospect of lingering cheap energy prices is starting to offer global consumers new confidence.
U.S. wheat prices hit a seven-month high, a move that many analysts believe is a response to the Russian government’s interventions in the commodity’s markets.
Sometimes the problem with a cure is that it takes too long to work. In the case of sagging crude oil market, it appears that it has become daily confirmation that the global economy is slowing down.
The ongoing fear of global deflation just doesn’t fit with most of signals flowing from the marketplace.
The recent market action appears to have been a capitulation event that has exaggerated global slowing fears.
Negative headline news has reached a fever pitch, seasonal commodity price pressure remains in place, adverse Dollar action dominates, and perhaps most importantly, the international economic outlook continues to deteriorate.
While it is premature to suggest that a major bottoming of commodity prices is imminent, a combination of bearish geopolitical pressures, distinctly adverse currency market action, slack physical demand and rising physical supplies could result in a crescendo of selling and perhaps an intermediate bottoming in several markets.
In retrospect, the sharp slide in physical commodity prices was well deserved, what with global macroeconomic sentiment eroding in the wake of signs of lost momentum in the US recovery, threats of additional sanctions against Russia, and perhaps most importantly, a soaring US Dollar.