This from the Chicago Merchantile Exchange "Daily Livestock Report":
We do not proclaim to know what, if any, effect fund liquidations have had on futures prices and will let others with a lot more expertise in this area debate the point. But we would like to
note that the slide in commodity prices did not start yesterday, or the week when Fannie and Freddie went belly up. Rather, prices have been drifting lower for a good part of this summer and, we suspect, a big part of it is due to a slowing global demand for commodities. The Baltic Dry Index - an index of ocean shipping rates - is often viewed as a good proxy of global commodity demand. Because shipping capacity is fairly inelastic in the short term, ocean shipping rates are seen as an indicator of growing or declining demand for raw materials. The index has declined precipitously since May and currently stands at 4760, some 60% lower than the peak on May 20 and 42% lower than a year ago. There is plenty of additional evidence that global growth may be waning. The surge in the value of the US dollar may have caught many by surprise but it reflects the changing monetary stance of central banks in a number of key economies. The decision by the Chinese central bank to cut lending rates and lower bank reserve requirements was especially poignant, illustrating sagging growth in one of the most vibrant growing economies. Chinese demand was often one of the main points used to explain the drivers for surging commodity prices.
We do not proclaim to know what, if any, effect fund liquidations have had on futures prices and will let others with a lot more expertise in this area debate the point. But we would like to
note that the slide in commodity prices did not start yesterday, or the week when Fannie and Freddie went belly up. Rather, prices have been drifting lower for a good part of this summer and, we suspect, a big part of it is due to a slowing global demand for commodities. The Baltic Dry Index - an index of ocean shipping rates - is often viewed as a good proxy of global commodity demand. Because shipping capacity is fairly inelastic in the short term, ocean shipping rates are seen as an indicator of growing or declining demand for raw materials. The index has declined precipitously since May and currently stands at 4760, some 60% lower than the peak on May 20 and 42% lower than a year ago. There is plenty of additional evidence that global growth may be waning. The surge in the value of the US dollar may have caught many by surprise but it reflects the changing monetary stance of central banks in a number of key economies. The decision by the Chinese central bank to cut lending rates and lower bank reserve requirements was especially poignant, illustrating sagging growth in one of the most vibrant growing economies. Chinese demand was often one of the main points used to explain the drivers for surging commodity prices.
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