With high commodity prices could we be close to a recession?
- Thread starter MushinT
- Start date
The commodity indexes give a biased number. Each of them is weighted heavily in one thing or another, so while an index shows high historical prices it might really only be high for a few select products.
Then there’s the inflation others mentioned above. Take the agricultural sector, prices are double what they were when I was a kid. All of the production costs have more than tripled in the same timeframe. Farmland prices are 8 to 10 times what they were back then. The actual profit per acre in dollars has dropped substantially and is down right depressing when you adjust it for inflation. If you were to adjust AG price charts to reflect purchasing power per bushel or pound the charts would be showing close to all time lows. Grain yields may have gone up 30% over those years but farmers are operating on a thin margin.
Any other commodity that has to be pulled from the ground probably has had the same production cost increase. Prices aren’t high, it’s just that our currencies buying power has been deflating at an accelerating pace for the last 30 years.
Then there’s the inflation others mentioned above. Take the agricultural sector, prices are double what they were when I was a kid. All of the production costs have more than tripled in the same timeframe. Farmland prices are 8 to 10 times what they were back then. The actual profit per acre in dollars has dropped substantially and is down right depressing when you adjust it for inflation. If you were to adjust AG price charts to reflect purchasing power per bushel or pound the charts would be showing close to all time lows. Grain yields may have gone up 30% over those years but farmers are operating on a thin margin.
Any other commodity that has to be pulled from the ground probably has had the same production cost increase. Prices aren’t high, it’s just that our currencies buying power has been deflating at an accelerating pace for the last 30 years.
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The high commodity prices are strange considering the USD keeps rising. You'd think it would be falling but I think in reality all currencies are falling due to endless bailouts from US to Europe to China.
The DX index is a trade weighted US dollar index so even if the USD rises it just means US has done a better job than Europe, UK or Japan.
The DX index is a trade weighted US dollar index so even if the USD rises it just means US has done a better job than Europe, UK or Japan.
Shower thought
How come a foreign currency falls against the dollar when the US bails them out while a US stock price rises when the government bails them out?
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Good ag comments.
That one farmer most likely did well;
he packed his wheat in camo bags + sold direct to feed store.
2 ] Most likely because US $ represents better business man-people on average ;
AUG 1998 drop was cased mainly by evil empire russia not paying debts.[same month LTCM]
3] Not sure what bailout stocks you are referring to?? DAL, GM ...... went bankrupt.
4]Chrysler did do well after bailout, but Peter Lynch [Fidelity]mentioned good reasons ,buying that one, better business according to him .
No stock in particular as I’ve never followed them. Just things I’ve heard in the coffee shop over the years that are probably untrue.%%
Good ag comments.
That one farmer most likely did well;
he packed his wheat in camo bags + sold direct to feed store.
2 ] Most likely because US $ represents better business man-people on average ;
AUG 1998 drop was cased mainly by evil empire russia not paying debts.[same month LTCM]
3] Not sure what bailout stocks you are referring to?? DAL, GM ...... went bankrupt.
4]Chrysler did do well after bailout, but Peter Lynch [Fidelity]mentioned good reasons ,buying that one, better business according to him .
How about gold and silver, or what about your favorite, cocoa? No need to answer.
%%How about gold and silver, or what about your favorite, cocoa? No need to answer.
ALL of the above\
copper/ brass \iron.and cut the cocoa with whole grains wheat, corn, + most anything else........
I like yellow brass more than yellow gold, commercial use.
Reading thru old emails came across this blurb about Copper from CME newsletter:-How about gold and silver, or what about your favorite, cocoa? No need to answer.
"So, what’s behind copper’s strength relative with its peers in the metals group, to crude oil and to the pace of growth in China. The answer seems to boil down to two factors: the energy transition and supply."
Just like Cocoa. So there are exceptions but most commods are hum drum lately.
https://www.cmegroup.com/insights/e...-defies-downdraft-in-metals-china-growth.html