MARKETS: WHAT’S NEXT? Tim Emslie has been with Country Hedging for nearly 10 years, starting as a grains analyst for the commodity brokerage subsidiary of CHS. He leads Country Hedging’s new commodity research department, a centralized unit that searches, aggregates and analyzes the data surrounding commodity markets. The unit will support Country Hedging broker analysts who provide customized expertise and advice to customers. WHAT HAPPENED TO THE GREAT DEMAND MARKET OF LAST SPRING AND SUMMER? The credit crisis and financial system problems were important factors in a sharp slowdown in economic activity worldwide that brought com -modity demand to an abrupt halt. In an amazing five-month turnaround, commodity markets went from rationing incremental demand out of the market to forcing out additional supply. The 2008 experience illustrated the dramatic difference in prices when the market perceives there is one bushel too many compared to when it perceives there is one bushel too few. Economic textbooks call it determining prices at the margin. The overall price collapse was due much more to a collapse in demand than to supply increases, with the exception of wheat, where a 12 percent increase in world wheat production brought wheat supplies and prices back in line with other agri -cultural commodities. WILL DEMAND RETURN? Not to the extent we saw in the first half of last year. Some of that activity appears to be a result of overleveraging, which has gone out of vogue in a big way. We have to be prepared for the economic slowdown to continue through at least the first half of 2009. Any significant price rallies during that time frame would be more likely to come from the supply side — in other words, from production problems. However, I expect that underlying demand growth trends from emerging economies will survive this economic contraction and there won’t be an immediate return to the persistently oversupplied markets of the 1980s and ’90s. HOW WILL DEMAND FROM THE ETHANOL INDUSTRY AFFECT 2009 COMMODITY PRICES IN LIGHT OF THE INDUSTRY’S RECENT STRUGGLES? Year-on-year ethanol demand is likely to grow at a slower pace. With crude oil prices expected to 12 January/February 2009 WWW.CHSINC.COM
Issue Articles
Markets: What’s Next? Q & A
Visit Article: https://c.chsinc.com/article/Markets%3A++What%E2%80%99s+Next%3F++Q+%26+A/962222/98408/article.html.