Death comes to us all. Life's but a walking shadow | It is an interesting analysis but I suspect they didn't take their analysis far enough to draw any useful conclusions. For example, looking at fig. 3 I see two maybe three periods where the price recovery was very prolonged, many more recovery periods of 2 to 5 years and 29% within 2 years.
It would have been more interesting to see how the magnitude of each downturn affected the time to recovery. Just what counts as recovery? By their definition the market recovered when the price finally reached the pervious high. By this definition it might take a long time for prices to reach the recent highs of $7 but producers might be quite satisfied if price returns to $5.
I myself have been wondering how much of the current situation depends on simple supply & demand (both local & global) vs. the overall economic situation. I haven't done a careful study of futures prices but I suspect that SAT may be partially correct with his "We're leaving." hypothesis. However I suspect that the level of investment in the futures by the "big" players depends less on the microeconomic situation of any particular commodity than the overall economic condition. If some of these really big players are leveraged by their other investments, declines in one sector may prevent them from "playing" in others. For instance, if the Saudi's aren't making money in crude they will have less money available to play in other commodities.
This raises the question about the consequences of QE. As the stock market deflates the amount of money available for other investments like commodities might decline and this lack of interest become reflected in futures prices. On the other hand, the really big players might just see agricultural commodities as a good place to put money given that people still need to eat even if they can't buy cars, etc. |
How long before corn prices recover?
