Join Tim Seymour on CNBC at 10:20 a.m. today, as Tim discusses
a mixed bag for commodities which are tied to emerging markets
fortunes, housing and construction data for the U.S. and China,
and how soaring grain prices may result in export quotas to
further limit supply.
Commodities are a real mixed bag at the moment: soft commodities
-- particularly grains, are sky high thanks to the effects of
drought on the American Midwest. Bulk commodities are scary in
the other direction. Iron ore hit $100 a ton on three million
futures today. Oil is really a supply-side story right now…Where
are we? This will be a headwind to the global economy,
limiting policy makers' choices in emerging markets (
EEM
,
quote
) -- food wars are back!
Meanwhile, U.S. construction data out tomorrow and Thursday
may tell us that real demand continues to plug higher for
materials. Cement -- see Cemex (
CX
,
quote
) six month highs -- and even copper should benefit from this.
Also, Chinese property price data was bullish on Sunday
night…
BHP
(
quote
) preview tomorrow will be huge for the space, as iron ore is at
55% of EBITDA. Capex cuts and taking production off line in
ore is the key to future success. Watch <$20 billion
in capex as a rally point here.
Emerging markets stocks benefit from higher commodity prices
and will outperform in the next leg of this rally.
In soft commodities: Glencore on tape today said the second
half of the year will be unprecedented and comparable to the
"Dust Bowl" of the 1930s. Grains will lead the commodity rally,
with soy and corn hitting all time highs.
Exports of corn will be well below normal as U.S. overall
production will be at a six year low in corn; crops are in the
worst condition since 1988.
Russia may ban wheat and grain exports to keep enough to feed
its own population.
World food prices were up 6.2% in July, and in many cases much
worse -- try buying a pack of Mozzarella cheese!
In short: the biggest contrarian trade in emerging markets
would be to short softs and go long bulks on a reversal of
fortune.