Corrections are a friend of investors. Same is true for professional traders. Traders on Main Street enjoy them less. Learn to take advantage of them, rather than be buffeted by them. Investors should be anticipating any possible correction in their favorite industries in order to make timely purchases. Currently, for example, the Agri-Food sector may be developing one of the first good corrections in some time. Cash prices for many Agri-Food commodities have retreated. This situation is reflected in this week's chart. Plotted with red circles is a simple stochastic oscillator on our Base Food Index. That index is comprised of the cash prices of 13 major Agri-Food commodities. The straight red lines are mean value of oscillator plus or minus the standard deviation. Most recent reading is well below the statistical relation that has existed for some time. A correction in Agri-Food price could be developing, and it may last for several weeks. This period should be used for investors to begin or add to positions in Agri-Food investments.
Agri-Food prices have been strong for some time as needs of China, India, and others have grown. Today, China is driving force on demand for Agri-Foods. These markets are now global in nature more so than ever before. Vegetable oil, for example, is one of those foods feeling the pressure of rising needs in China. According to Commodity News for Tomorrow, Chinese production of edible oils will rise slightly in 2008, but still cause them to increase imports by 14%. Chinese government will have little choice but to bid aggressively in global markets and raise domestic prices. Producers of palm oil(world's largest edible oil), soybeans, corn and canola will all benefit from the growing short supply situation in edible oils. Perhaps the time has arrived for forward looking investors to do their research on the beneficiaries of the globally short supply situation in Agri-Foods.
AGRI-FOOD THOUGHTS are from Ned W. Schmidt,CFA,CEBS, publisher of Agri-Food Value View, a monthly exploration of the Agri-Food grand cycle being created by China, India, and Eco-energy. To review a recent issue, write to firstname.lastname@example.org.