OUTLOOK ON GRAIN MARKETS
ROLAND MORRIS, COMMODITY STRATEGIST: We currently think that the rally in the grain market is over. We believe that South America -- particularly Brazil and Argentina – will plant a very large crop. It looks like there is a chance the weather conditions will be slightly improved. That will not fix the balance sheet completely in grains, but it should help. And with another successful season in the United States, we ought to have beans and corn return to normal pricing by the end of next year. We are currently negative on soybeans because we think the U.S. crop did improve late in the season, and it's coming in a little bit better; the harvest is better than anticipated.
CRUDE OIL PRICE RANGES
There are a couple things going on in the oil market. We have had a pretty strong rally over the last couple months, driven by expectations of global monetary policy, but additionally by the tension in the Middle East. That continues and the market probably got a little ahead of itself recently when WTI crude oil ran up to $100. We believe that crude ought to trade between $90 and $105 based on West Texas intermediate. We think that's the most likely scenario. If crude oil gets above $105, it is likely to destroy some demand and become an economic negative for the economy. We feel that it is likely to stay around this level and probably for the next six to eight months as well.
NATURAL GAS PRICE ANALYSIS
We feel natural gas is stuck in a range virtually forever between $2.50 and $4. That's not to say that it won't go up to $5 if we have a cold winter, but that's highly likely. We have plenty of production to bring online, which should tamp prices back down fairly quickly.
CHINA AND THE PRICE OF COPPER
Copper is really the only industrial metal that is in tight supply. It has recently rallied on the back of monetary easing. We suspect that brought it up to the top of the relative value range. Until we start seeing some concrete news out of China, maybe more easing after the transfer of power, or some starting or larger infrastructure announcements, copper is likely to stay about where it is currently.
GOLD TO LEAD PRECIOUS METALS?
Precious metals should continue to do well. At the beginning of this rally, platinum and silver were the strongest of the precious metals group. I think that this is likely to subside and that gold will take the leadership on the long term. Monetary policy is the driving factor; it's going to be expansionary, both in the U.S. and in Europe. We need to maintain nominal growth and a negative interest rate situation, which is very positive for gold. Gold and gold equities should perform well in that environment and that is likely to last for some time.
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