viernes, 30 de enero de 2015

viernes, enero 30, 2015
January 28, 2015 9:24 am

Commodities and currencies: the uneven link

Gregory Meyer in Miami

Testing the Wall St maxim: When the dollar strengthens, commodity prices soften
 

It’s a common assertion on Wall Street: when the dollar strengthens, commodity prices soften.
 
The logic makes sense. Most internationally traded commodities are priced in US dollars, as are benchmark futures such as Brent crude oil. So, a rise in the dollar increases the value of the same number of tonnes, barrels or bushels, all else equal.

In the real world, it’s not that simple and anyone betting a bullish dollar outlook will uniformly pressure commodities is asking for trouble. Some commodities are more sensitive to the dollar than others.

A case in point is gold. Marketed as a hedge against a depreciating dollar, it has gained nearly 3 per cent in the past year, even as the dollar index rose 17 per cent.

But gold isn’t really a commodity, critics will say. It’s a store of value, an alternative currency.
The lack of a neat correlation between currencies and raw materials was a recurring theme at the Commodity Markets Council trade group conference in Miami this week.
In agricultural markets, a stronger dollar could keep grain prices under pressure, but not in a formulaic way.

Exports of corn, wheat and soyabeans predominantly come from a few regions: North America, South America and the Black Sea. The costs of farmers outside the US are often borne in local currencies, so the depreciation of the Russian rouble or Brazilian real can increase their incomes.

Dan Basse, president of the consultancy AgResource, said that when he called agricultural clients in Russia last week, they were asking for advice on whether to buy an Audi or Mercedes-Benz.

“The Russian farmer, the Brazilian farmer, the Australian and Canadian farmers are all very, very happy. They are looking to expand their seedings in the upcoming year,” said Mr Basse.

More seedings should mean even more grain hitting an amply supplied market — a bearish sign. The US Department of Agriculture notes: “As the Russian rouble depreciated significantly over the last several months, wheat was exported at a record pace and domestic prices rose sharply.”
 
Oil and the dollar have at times moved in opposite directions and now is one such time.

However, there’s “no really clear answer” to questions about the dollar’s impact on oil, Lawrence Eagles, BP’s head of North American and global crude analytics, told the CMC conference.

Unlike grain, oil is produced by a concentrated global industry, with many costs paid in dollars regardless of where they’re incurred. If a foreign producer’s oil is worth relatively more in local terms thanks to dollar strength, so are many of its expenses.

“Looking at the dollar as being one of the key drivers of what’s happening at the moment is a bit of a misnomer,” said Mr Eagles, who formerly served at the International Energy Agency and JPMorgan Chase. “Really, this is not about currencies.”

While its effect on commodities is uneven, the outlook for the dollar looks robust. Europe just embarked on an aggressive monetary easing, while traders are jostling over the timing of an expected US interest rate rise.
 
Asked for his best trade ideas, Joe Nicosia, a senior executive at Louis Dreyfus Commodities, the agricultural trader, recommended selling soyabeans — and the euro.

“There’s nowhere for that currency to go but down,” he said.


The Commodities Note is an online commentary on the industry from the Financial Times

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