Will agricultural markets get a lift from signs of revived investor interest in commodities overall?
Veteran technical analyst Dean Christians, who recently founded Turning Point Market Research, pointed out in a Sunday note that after the Bloomberg spot commodity index broke out to a new high in October, things really got interesting.
Since that initial October breakout, the index registered 10 additional new highs over the past six weeks. That’s a clear sign the trend has turned decisively upward from neutral, Christians said.
The breakout comes after a multi-year decline that was marked by a persistent pattern of lower highs and lower lows followed by a transition into a prolonged sideways consolidation.
He cautions that a clustering of 3-year highs in a short span for the index can look decisively bullish, but historically it hasn’t guaranteed a clean or durable uptrend. Looking back at past instances of such clusters, Christians found that while the index was higher roughly 73% of the time nine months later, it was often a bumpy ride, as seen in the chart and table below.
Could this time be different? The jury is out, but a potential catalyst could be here in the form of a powerful wave of AI-related demand for industrial and energy commodities, Christians said.
“The rapid expansion of artificial intelligence, data centers, and electrification technologies is increasing demand for key industrial and energy-related commodities. If these structural trends persist, the index’s breakout could represent not just a technical turning point but also an early reflection of a new, AI-driven phase of commodity consumption,” he wrote.
That could be a welcome turn for commodity producers, but why has the sector languished for so long?
Christians told Pro Farmer that a long stretch of steady but tepid economic growth has deprived the sector of the sort of catalyst that has typically fueled strong rallies. Big pushes higher for commodities typically happen off a multiyear low following a big growth scare or outright economic contraction.
As for agricultural commodities, Christians said soybeans are looking the best of the bunch, breaking out from a base after suffering a multiyear bear market.
“It looks the most constructive of any of them from a pure price setup,” he said.