2016 Commodity Outlook: El Niño To Shake Things Up?

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Commodity Trading Research
2016 Commodity Outlook El Niño To Shake Things
Up?
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• Hi, My name is Justin and Im with Commodity
  Trading Research, today were reviewing our
  recently published article

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• 2016 Commodity Outlook El Niño To Shake Things
  Up?

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• In recent weeks weve been discussing whats in
  store for commodities in 2016.After a disastrous
  2015, investors are searching for signs of a
  bottom in assets like crude oil, gold, corn, and
  coffee.

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• Lets pick up right where we left off In the
  first part of this 2016 commodity outlook series
  we discussed oil, natural gas, gold and silver.

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• While theres certainly an oversupply of energy
  commodities at the moment, I suspect well see a
  bullish shift in market structure in 2016.

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• As for precious metals, not only are fundamentals
  and sentiment still overwhelmingly bearish but
  the technical trend is still solidly to the
  downside.

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• Until inflation becomes an issue, or the Federal
  Reserve backtracks on their plan to raise
  interest rates, precious metals will likely stay
  under bearish pressure.

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• As you can see, its a mixed bag when it comes to
  the worlds most widely traded commodities.

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• What about lesser-known assets?

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• First of all, let me point out that very few
  commodities escaped the 2015 wipeout unscathed.
  Only cocoa, orange juice, and cotton are turning
  in positive performance since the start of the
  year.

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• That leaves a lot of commodities down in the
  dumps Take coffee, which is down 31
  year-to-date. With the luscious bean trading at
  multi-decade lows near 1.20 a pound investors
  are wondering if an uptrend will ever return to
  this market.

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• Their questions may soon be answered
• Analysts at the International Coffee Organization
  foresee production cutbacks coming from several
  major producing countries.

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• As a result, even more emphasis will be placed on
  Brazil, the worlds largest coffee producer.

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• While its tough to say if Brazil will be able to
  pick up the slack in the next production cycle, I
  can tell you this
• The price of coffee is quite oversold on a
  long-term basis.

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• That fact increases the odds of a2016 rally,
  should weather related worries actually come to
  fruition. The get an idea of what Im talking
  about, look tothe sugar market.

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• The commodity is seeing a substantial price
  upturn in recent weeks due to similar technical
  and fundamental market factors.

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• That leaves us with grains

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• All three of the major grain markets- corn,
  soybeans, and wheat- are trading at multi-year
  lows thanks to abundant global supplies. Its
  becoming quite clear farmers are getting darn
  good at what they do.

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• Thanks to modern technology, theyre producing
  remarkable quantities of grains in record time.
  As a result, global grain stocks are teeming with
  inventory.

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• Therefore, its not surprising to see corn and
  wheat trading at their lowest prices since the
  2009 financial crisis. Is there any hope for corn
  and soybean bulls in 2016?

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• As of right now, its not looking so good.
  Thanks to one of the strongest El Niños ever
  recorded developing in the Pacific Ocean, its
  likely these two commodities stay subdued in 2016.

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• After all, the disruptive weather pattern
  typically brings well-timed rainfall to the US
  plains. The situation will likely contribute to
  another abundant corn and soybean harvest next
  year.

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• What about wheat?

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• While El Niño provides the US with ample rain,
  the opposite happens in Australia. The
  continent suffers higher temperatures and lack of
  rainfall.

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• Since Australia is one of the worlds largest
  wheat producers, an output downturn couldprovide
  support for the commodity in 2016.

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• The same goes for cotton
• El Niño induced drought in India, the worlds
  second largest producer of the commodity behind
  China, tends to support prices.

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• Given the multi-year flat line in cotton prices,
  cotton bulls will welcome any disruptive force
  sending prices higher.

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• To sum it all up

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• Theres still plenty of uncertainty in store for
  commodities in 2016. Shaky global economic growth
  mixed with a strong US Dollar will be a force to
  reckon with, just as it is in 2015.

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• But thats not to say there wont be bullish
  opportunities in hard assets.
• This years El Niño is shaping up to be one of
  the largest on record.

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• As a result, many soft and grain commodities
  could see price gains as the weather pattern
  alters production. In case youre unaware, these
  are exactly the types of opportunities we focus
  on in the Commodity ETF Alert.

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