“Go to where the puck will be”

I’ve been cautioning about lower commodity prices with mean reversion being the major undertone.

My writings have broadly warned about not chasing prices that have ‘gone parabolic’ amongst the many basis’ and theorems.

In todays trade, commodities are getting smashed again.

Copper is down 5%, Natural Gas is 8% weaker, Platinum and Nickel are lower, Silver is off 2%, Corn and Soybeans have declined 3%, Oats have slumped 12% while Wheat and Cotton have eased 4%, with the latter down 20% for the week.

Many of these prices are the same or below the February 23, 2022 Ukrainian invasion.

Remember all that palaver about Ukraine being the ‘bread basket of Europe’. Well that may be the case, but it matters if you chase things higher and pay the wrong prices.

Now, I’m not saying ‘short’ a host of commodities as it’s too late (while some of the energy complex has yet to start) or at least the margin of safety has diminished.

You want to position for the lows and what opportunities appear in the 2nd and 3rd derivitive.

I’ve attached charts of Cotton and Urea.

June 23, 2022
by Rob Zdravevski
rob@karriasset.com.au