The United States Department of Agriculture USDA collects a staggering amount of information on crop production within the US and from around the world.
While unless you are careful one can subject themselves to USDA information overload the information can be quite useful to those who take a longer term view with their commodity trading. And those are the folks who over a reasonable amount of time make the big money from commodity trading.
With climate change sure to effect the production of crops worldwide the USDA’s weather and climate pages contain information, like “Weekly Weather and Crop Bulletin” that are well worth checking out frequently.
The rapid industrialization of China and India continue.
While we should be happy that the living standards in these countries have been increasing we should also be aware that extreme demand pressures in the face of declining supplies will put upward price pressure on many commodities for at least the next several years and perhaps much longer.
The following is from the Daily Reckoning news letter service:
“the entire world can’t get enough copper, zinc, lumber and oil. But bringing on new production takes time. Supply can’t catch up with demand overnight. In fact, it’s going to take quite some time, especially when you throw the consumption potential of India and China (37% of the world’s population) into the mix. Consequently, commodities, the market for the essentials, will remain tight for the foreseeable future. ”
Of course, markets do not move in a straight line, especially commodity markets. However, the long side of markets like copper, lead, gold, silver, lumber, and oil should be favored for many years to come.
That means buying or adding to positions on price corrections, and looking for the bull market to continue for a long time to come.
The commodities markets are influenced by many factors. Of course, on a long term trading basis fundamentals are important. The demand and supply balance of a commodity will ultimately determine prices.
However, on either a short term or long term basis the news of the day , week, or month, can have a major price impact.
For example let’s say there is a severe drought in a major US corn growing region. News of a rain producing weather front moving in come have an immediate impact on corn futures prices.
News of continued drought and damage to the corn crop will have a bullish impact.
Another example of how news could immediately effect a market would be news of a terrorist attack against a key Saudi Arabian oil production facility. News of this magnitude could easily cause a $1.00 to $2.00 a barrel surge in crude oil prices.
When you trade commodities you must closely follow the news.
