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Is the worst over?

Agriculture.com Staff 11/07/2008 @ 1:44pm

In recent weeks, both commodity and equity markets have shown some life by rebounding. Is the worst over? Obviously, we don't have a definite answer. It is likely that both stocks and commodities will be volatile in the months ahead. From a long-term perspective, it is also likely many markets have seen their low or are close.

Both equity and commodity prices could take another slide but will find increased buying interest based on value or limited supply. Equities, especially well run and positioned companies, are considered bargains and undervalued. Long-term investors will recognize these values and eventually buy, providing underlying support for stocks, both in America and abroad.

A substantial recovery in commodities over the next three to six months is not likely, but a general recovery is. As the world grapples with lower purchasing power, commodities, while still experiencing good demand, will not see the euphoric mindset that engulfed many markets just a mere six months ago. In spring, world supplies of commodities were viewed as tight, and regardless of how much was produced, it just did not seem there would be enough! Demand would outstrip production. The economy had a meltdown four months later, and the mindset of many has changed. A just-in-time inventory approach by end users of grain and soybeans will be the new approach for many when purchasing commodities. Tight credit and cash flow will dictate this buying method.

A weather event in the Southern Hemisphere or some other unforeseen variable could come into play to rapidly advance prices. This, however, is unlikely. For now, expect a recovery of grain and soybeans into the midwinter months and possibly early spring. Cash flow and a cautionary investing approach will keep prices from making large advances.

If you have comments or questions, call Top Farmer at 1-800-TOP-FARM ext. 129.

In recent weeks, both commodity and equity markets have shown some life by rebounding. Is the worst over? Obviously, we don't have a definite answer. It is likely that both stocks and commodities will be volatile in the months ahead. From a long-term perspective, it is also likely many markets have seen their low or are close.

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