The Rising Price of Tea Matters More Than You | Australian Markets

As a geologist, my focus is on mining and exploration… The laborious stuff… minerals.

But have you ever ever puzzled in regards to the different half of the commodity world?

Things like wheat, soybeans, cotton and even obscure issues like orange juice or tea!

These are all tradeable supplies that may offer distinctive alternatives.

And after we speak about monitoring the ‘commodity cycle’, it pays to keep a close eye on the total spectrum of alternatives on this enviornment.

The Quiet Boom in Food Commodities

Gold’s stellar efficiency over the past 12 months is well-known… Up over 40%. Yet some of the ‘softs’ have eclipsed gold over that period.

Take the common-or-garden espresso bean; it’s up more than 50% over the past 12 months! Same with sunflower oil. Before that it was cacao beans.

Food commodities don’t seize headlines like gold or silver, but their price strikes typically eclipse metals at sure instances within the commodity cycle.

But is it even attainable to invest in them?

Trading in gentle commodities is normally solely within the realm of extremely liquid ‘futures traders.’

But there are particular ETFs which mirror the efficiency of these futures markets, just like the Teucrium Wheat Fund (NYSE: WEAT).

It’s a easy approach to gain publicity for those who suppose the price of wheat goes to surge. The similar is true for a lot of different particular commodity funds that monitor futures markets.

But why trouble if You’re a Long Term Investor?

Just such as you would with gold, shopping for gentle commodities provides you publicity to tangible property. An asset class that largely sits outdoors the financial system.

Thinking your diversified by investing in a combine of US, European and Aussie shares, in my thoughts isn’t actual diversification.

Equity markets are inclined to correlate intently over growth and bust cycles. Whether your stocks are listed in Sydney, Toronto or Brussels, share markets are inclined to rise and fall collectively.

But they’ll at all times be a need for food commodities DESPITE what’s taking place within the broader economic system.

Just final week, the price of tea surged by nearly 20%:

That was on a day when the S&P500 tumbled by over 2%.

Off course, we are able to’t make an evaluation from a single day of trading, however traditionally talking, commodities, have been an efficient hedge.

There’s no higher instance than the Nineteen Seventies.

As you may see, the average actual ‘inflation-adjusted’ return for Aussie shares was detrimental from 1970 to 1979:

Imaging that; a decade of holding stocks solely to see the efficiency decline in actual phrases!

But all through that time, commodities and commodity stocks surged.

In 1973, OPEC enforced the notorious oil embargo towards the US.

This was OPEC’s response to America’s help of Israel during the Yom Kippur War. Oil costs quadrupled from $2.90 to $11.65 a barrel!

That efficiency was intently adopted by one other important vitality commodity:

Adjusted for inflation, the price of uranium shot previous US$200 per pound by the late Nineteen Seventies. A price document that stands right this moment.

Today, uranium trades for simply US$65 per pound.

And in phrases of the ‘softs’ wheat costs exploded on the back of this inflation-led commodity cycle:

Tripling in price from the early Nineteen Seventies to a peak in 1974 and remaining elevated all through the last decade.

Across the board, commodity property surged within the Nineteen Seventies:

And that’s exactly what we’d count on from a typical ‘commodity cycle.’

A period that delivers larger costs throughout the total spectrum of the commodity market.

From mining stocks, treasured metals, industrial metals, vitality AND food staples.

And because the Nineteen Seventies blueprint exhibits, that may happen regardless of the final equity market being in decline.

So, is that what we are able to count on over the rest of this decade?

As I’ve detailed prior to now, gold usually leads (rises first) in these massive commodity-wide cycle occasions.

And with gold costs surging to new all-time highs this 12 months, you might have a clear roadmap to what may very well be across the nook.

In my thoughts, the upper gold costs transfer from right here, the larger this commodity cycle may very well be.

To be a part of me on that journey, you are able to do so right here.

Until subsequent time.

Regards,

James Cooper,
Editor, Mining: Phase One and Diggers and Drillers

All advice is basic advice and has not taken under consideration your personal circumstances.

Please search impartial financial advice concerning your own scenario, or if unsure in regards to the suitability of an investment.

James’s Premium Subscriptions