![\"Corn](\"https:\/\/cdn.equipmentradar.com\/assets\/media\/blog\/images\/934b54a7-e8c3-4eba-a4c6-5bb94b7438ed-600x450.jpg\")
<\/source><\/source><\/picture>\n <\/figcaption><\/figure>\n<\/div>\n
\n Summary
\n <\/h2>\n\n- \n Corn is due for a sharp rally, and we will likely see $8-10 per bushel between 2021-2023\n <\/li>\n
- \n Corn has been in a deep bear market since 2013… Eight long years. Core supply and demand fundamentals are now improving.\n <\/li>\n
- \n Global commodity prices have started to break out of a multi-year range. Drivers include:<\/p>\n
\n- \n the demand recovery as the pandemic moderates\n <\/li>\n
- \n supply disruptions due to shortages, and\n <\/li>\n
- \n fiscal stimulus injected by governments worldwide. A rising tide lifts all boats.\n <\/li>\n<\/ol>\n<\/li>\n
- \n Legendary commodity investor
\n Jim Rogers<\/a>
\n has often said that major commodity cycles tend to be
\n about every 20 years<\/a>.
\n He predicted the last great commodities bull market that started in 1999… 1999 + 20 = 2019.
\n Is it time to get long-term bullish?<\/i><\/li>\n<\/ul>\n\n A Rising Tide Lifts All Boats
\n <\/h2>\n
\n Commodity cycles follow the old adage \u201chistory rhymes, but it does not repeat\u201d. We always have had commodity
\n cycles, and we always will. The driving factors for each cycle tend to differ.\n <\/p>\n
\n The last corn bull market was driven in part by the
\n Renewable Fuel Standard<\/a>
\n (\u201cRFS\u201d, also known as the ethanol
\n mandate) and a growing middle-class in China. Common cycle drivers in the past have included weather
\n fluctuations, wars, embargoes, tariffs, inflation, etc.\n <\/p>\n\n The current cycle\u2019s drivers include:\n <\/p>\n
\n- \n New fiscal stimulus and meaningful increase in money supply\n <\/li>\n
- \n Labor and farmhand shortages due to travel restrictions\n <\/li>\n
- \n Growing middle class India, Indonesia, Vietnam, Sub-Sahara Africa and other new-era emerging markets\n <\/li>\n<\/ul>\n
\n Last week the United Nations’ Food & Agriculture Organization (FAO) released its March 2021 report.
\n The FAO tracks a global basket of food staples including sugar, dairy, vegetable oils, cereals and meat
\n \u2014 this index rose 2.4% in February, reaching its highest level since July 2014 (ninth consecutive monthly increase).\n <\/p>\n
\n The FAO\u2019s food index was stuck in a range of plus or minus 10% since 2015, and it began to break out
\n of the range starting in 4Q 2020. It is now ~20% higher than the trailing five-year range, with the
\n bulk of the increase occurring over the last nine months. The report had a common theme for most of the
\n categories: shrinking supply and growing global demand<\/i>.\n <\/p>\n\n![\"FAO](\"https:\/\/cdn.equipmentradar.com\/assets\/media\/blog\/posts\/R323475\/20210310-fao-food-price.png\")
<\/source><\/source><\/picture><\/div>\n\n\n Source:
\n UN FAO<\/a><\/p>\n\n Takeaway: The FAO food price index was stuck in a range for five years, and recently it started to break out (red and yellow lines lines).\n <\/p>\n<\/div>\n<\/div>\n
\n There is a modest correlation and common trend among agriculture commodities long-term, as well as broader
\n industrial metals and energy. During the initial onset of the pandemic commodities took a hit as markets re-calibrated
\n for lower growth expectations.\n <\/p>\n
\n We saw oil prices go negative for the first time ever, and a flight to safety
\n and bonds. Commodities bottomed and began their strong recovery when governments around the world announced
\n their large fiscal stimulus plans.\n <\/p>\n
\n The fiscal stimulus is impacting prices and demand. The transmission of this stimulus is different than prior economic recovery
\n measures that followed the Financial Crisis – this stimulus is cash given directly to people and businesses to spend immediately.\n <\/p>\n
\n Money supply (as measured by the
\n Federal Reserve\u2019s M3<\/a>)
\n is 24% higher than it was prior to the stimulus. Congress is
\n about to pass legislation to
\n distribute another $1.9 trillion<\/a>,
\n which is an additional 10% growth to the money supply.\n <\/p>\n![\"Asset](\"https:\/\/cdn.equipmentradar.com\/assets\/media\/blog\/posts\/R323475\/20210310-wasde-prices-surged.jpg\")
<\/source><\/source><\/picture><\/div>\n\n These are some big moves by historical standards. Reported consumer price inflation is +1%? Hmm… that\u2019s a head-scratcher.\n <\/p>\n
- \n
- \n the demand recovery as the pandemic moderates\n <\/li>\n
- \n supply disruptions due to shortages, and\n <\/li>\n
- \n fiscal stimulus injected by governments worldwide. A rising tide lifts all boats.\n <\/li>\n<\/ol>\n<\/li>\n
- \n Legendary commodity investor
\n Jim Rogers<\/a>
\n has often said that major commodity cycles tend to be
\n about every 20 years<\/a>.
\n He predicted the last great commodities bull market that started in 1999… 1999 + 20 = 2019.
\n Is it time to get long-term bullish?<\/i><\/li>\n<\/ul>\n\n A Rising Tide Lifts All Boats
\n <\/h2>\n\n Commodity cycles follow the old adage \u201chistory rhymes, but it does not repeat\u201d. We always have had commodity
\n cycles, and we always will. The driving factors for each cycle tend to differ.\n <\/p>\n\n The last corn bull market was driven in part by the
\n Renewable Fuel Standard<\/a>
\n (\u201cRFS\u201d, also known as the ethanol
\n mandate) and a growing middle-class in China. Common cycle drivers in the past have included weather
\n fluctuations, wars, embargoes, tariffs, inflation, etc.\n <\/p>\n\n The current cycle\u2019s drivers include:\n <\/p>\n
- \n
- \n New fiscal stimulus and meaningful increase in money supply\n <\/li>\n
- \n Labor and farmhand shortages due to travel restrictions\n <\/li>\n
- \n Growing middle class India, Indonesia, Vietnam, Sub-Sahara Africa and other new-era emerging markets\n <\/li>\n<\/ul>\n
\n Last week the United Nations’ Food & Agriculture Organization (FAO) released its March 2021 report.
\n The FAO tracks a global basket of food staples including sugar, dairy, vegetable oils, cereals and meat
\n \u2014 this index rose 2.4% in February, reaching its highest level since July 2014 (ninth consecutive monthly increase).\n <\/p>\n\n The FAO\u2019s food index was stuck in a range of plus or minus 10% since 2015, and it began to break out
\n of the range starting in 4Q 2020. It is now ~20% higher than the trailing five-year range, with the
\n bulk of the increase occurring over the last nine months. The report had a common theme for most of the
\n categories: shrinking supply and growing global demand<\/i>.\n <\/p>\n\n<\/source><\/source><\/picture><\/div>\n\n\n Source:
\n UN FAO<\/a><\/p>\n\n Takeaway: The FAO food price index was stuck in a range for five years, and recently it started to break out (red and yellow lines lines).\n <\/p>\n<\/div>\n<\/div>\n
\n There is a modest correlation and common trend among agriculture commodities long-term, as well as broader
\n industrial metals and energy. During the initial onset of the pandemic commodities took a hit as markets re-calibrated
\n for lower growth expectations.\n <\/p>\n\n We saw oil prices go negative for the first time ever, and a flight to safety
\n and bonds. Commodities bottomed and began their strong recovery when governments around the world announced
\n their large fiscal stimulus plans.\n <\/p>\n\n The fiscal stimulus is impacting prices and demand. The transmission of this stimulus is different than prior economic recovery
\n measures that followed the Financial Crisis – this stimulus is cash given directly to people and businesses to spend immediately.\n <\/p>\n\n Money supply (as measured by the
\n Federal Reserve\u2019s M3<\/a>)
\n is 24% higher than it was prior to the stimulus. Congress is
\n about to pass legislation to
\n distribute another $1.9 trillion<\/a>,
\n which is an additional 10% growth to the money supply.\n <\/p>\n<\/source><\/source><\/picture><\/div>\n\n These are some big moves by historical standards. Reported consumer price inflation is +1%? Hmm… that\u2019s a head-scratcher.\n <\/p>\n