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MONTHLY COMMODITY OVERVIEW
Prepared by The Hightower Report
It would appear the storm of the Asian crisis is passing with only minor downstream effects expected in certain commodity markets. By our analysis the most probable leading indicator for a return of the Asian impact would be seen in the livestock markets. Imports of U.S. meat to Asian countries over the last several years has been the primary fuel in the livestock industry in the U.S., especially in the poultry sector. Japanese meat demand is down and thus the collapse of Thailand's currency has made poultry from this country more competitive to American and Chinese poultry in the region. China's poultry exports for 1998 are now expected to fall as much as 30% from 1997 exports of 315,000 tons.
As demand dwindles from Japan and other Asian countries, the U.S. domestic market will need to absorb an increasing supply of poultry, pork and beef possibly giving up some of the residual price gains. Therefore, besides watching the daily fluctuations in world equity markets, commodity traders should really watch the action in cattle and pork prices for a truer measure of any sustained demand contraction! In general most commodity markets are nearing the end of critical supply periods. As mentioned early in 3rd quarter newsletters the normal seasonal downdraft in commodity prices was expected to continue through November and early December but we should be nearing an end to the period where traders should favor the short side. In fact, a 12-year seasonal of the CRB Index depicts the biggest seasonal rally from mid-December into early January. With notable exceptions of energy and metals prices, most markets have moved past the “period of highest supply.” However, in a number of markets bullish attitudes have been based somewhat on the theory of exploding Asian demand which even in the best case scenario has been replaced with a wait and see attitude.
Takers should take the cue of the world equity markets and the meat markets to determine if in fact the Asian effect is returning to the bull camp.
For daily market updates of the Hightower Report of Comprehensive Commodity Research, call 900-225- 2200, extension 1 for Trader's Update. The cost per minute is $1.33.
December 3, 1997 The Hightower Report
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