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Fear Rises Over The Potential For Food Shortages In The U.S. - The Cure For Low Prices Is Low Prices

Summary

  • Low prices and scarce supplies - Meats are a case study.
  • The weather is critical and uncertain.
  • Nothing stokes civil insurrection like food shortages - A very contentious election is on the horizon in the US.
  • Stimulus comes at a price for currency values.
  • Agriculture is a year-to-year sector, and many prices are near the low end of their pricing cycles - DBA holds agricultural futures contracts.
  • Looking for more stock ideas like this one? Get them exclusively at Hecht Commodity Report. Get started today »

First, it was toilet paper and paper towels, and now, it is beef, pork, and other animal proteins. Since the end of February, a combination of hoarding and bottlenecks in the supply chain has been making supermarkets in the United States, and other parts of the world, operate a lot like Russia during the days of the USSR.

During that period, I did a fair amount of business in the old Soviet Union and the Russian Federation after Glasnost. As I traveled around Moscow, the queues outside markets stretched for what seemed like miles. I had not witnessed anything like it before and after, until just a few short weeks ago when I ventured out to a local Costco early one morning to find that the line to enter the superstore brought those memories back. Whenever I returned to the US or Europe from the trips to Russia, I was thankful that the shelves were full of many product choices. Lately, I have found more than a few aisles of empty shelves during trips to the local supermarket.

The deflationary spiral caused by the global pandemic has made many Americans and Europeans realize the things they previously took for granted. Prices of many agricultural commodities have been falling, but that does not mean that shortages cannot develop.

The Invesco DB Agriculture Fund (NYSEARCA:DBA) holds futures contracts in many of the leading agricultural commodities, including grains, meats, and soft commodities.

Low prices and scarce supplies - Meats are a case study

During my recent trip to Costco, I found that purchases of chicken, beef, and pork are now limited to only one item of each per customer. Many people have been stocking up and filling their freezers with animal protein to practice social distancing and limit trips to the supermarket to limit the spread of

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This article was written by

Andrew Hecht profile picture
28.62K Followers
Weekly commodities commentary and calls, from a Wall Street veteran
Andy Hecht is a sought-after commodity and futures trader, an options expert and analyst. He is the #2 ranked author on Seeking Alpha in both the commodities and precious metals categories. He is also the author of the weekly Hecht Commodity Report on Marketplace - the most comprehensive, deep-dive commodities report available on Seeking Alpha.

Andy spent nearly 35 years on Wall Street, including two decades on the trading desk of Phillip Brothers, which became Salomon Brothers and ultimately part of Citigroup.

Over the past two decades, he has researched, structured and executed some of the largest trades ever made, involving massive quantities of precious metals and bulk commodities.

Andy understands the market in a way many traders can’t imagine. He’s booked vessels, armored cars, and trains to transport and store a broad range of commodities. And he’s worked directly with The United Nations and the legendary trading group Phibro.

Today, Andy remains in close contact with sources around the world and his network of traders.

“I have a vast Rolodex of information in my head… so many bull and bear markets. When something happens, I don’t have to think. I just react. History does tend to repeat itself over and over.”

His friends and mentors include highly regarded energy and precious metals traders, supply line specialists and international shipping companies that give him vast insight into the market.

Andy’s writing and analysis are on many market-based websites including CQG. Andy lectures at colleges and Universities. He also contributes to Traders Magazine. He consults for companies involved in producing and consuming commodities. Andy’s first book How to Make Money with Commodities, published by McGraw-Hill was released in 2013 and has received excellent reviews. Andy held a Series 3 and Series 30 license from the National Futures Association and a collaborator and strategist with hedge funds. Andy is the commodity expert for the website about.com and blogs on his own site dynamiccommodities.com. He is a frequent contributor on Stock News- https://stocknews.com/authors/?author=andrew-hecht

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.

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