Commodities Deflate! Only Gold, Nat Gas Rise!

Natural gas always seems to march to a different drummer. It is skyrocketing on yesterday's EIA report. But if this deflationary trend catches on, it will likely deflate soon also. 

Grains -- deflation

Crude Oil -- deflation

Industrial Metals (Copper) - deflation

Gold rises

Natural Gas rises to its own drummer

Metals On Steady Course to Higher Prices

This is the weekly chart for copper. Palladium, platinum, silver, and gold have somewhat similar charts.

And Now, Grain Prices Plunge Into the Depths, Too!

With grain prices having been so strongly linked to demand decay and poor economic performance lately, grains continue to show weakness in the price complex. I fully expect to see a stout rally in the grains sometime this winter, but today, prices continue to show weakness. We should keep in mind that Congressional mandates for the 2009 season require that nearly 50% of all domestic corn production be used for ethanol, an amount significantly higher than it was for 2008.

This price weakness for grains (corn and soybeans especially) is significant because farmers may decide to significantly cut production next Spring if prices remain at these levels. Current corn and soybean prices are below farmers' production costs according to recent reports from analysts, so either the supply will diminish at these prices levels (as farmers cut production), or perhaps demand will rise. Typically, however, during an economic slump, demand remains soft for commodities, thus suppressing prices. Still, food commodities tend to establish very firm bottoms and move higher while other commodities like industrial metals continue to fall. After all, we still have to eat even when industrial production slumps!

Wheat - Long-term Downtrend

Often, with all the talk of high commodity prices, the news media tends to ignore that many commodities prices are moving lower. Many of the soft commodities have been flat to lower over the past few months, including sugar, coffee, cocoa, and cotton. Both industrial and precious metals are also well off their highs from earlier this year. This chart for wheat is another example. The price of wheat has fallen 40% in the past two months -- more than $5.00 per bushel! The left chart is the daily chart, and the two in the middle and the right side show today's activity on intra-day charts. That daily chart for wheat has shown prices falling for more than two months!