In this weekly Commodities Watch column, John T. Barone, president and commodities analyst for Market Vision Inc., offers a snapshot of the state of commodities for restaurants.
We experienced a six-year period where macroeconomic factors such as a weaker dollar, global demand and ethanol combined to create one of the biggest commodity bull markets in history. Now, some of those factors appear to be reversing.
The Reuters/Jefferies CRB Index, which measures a broad range of commodity prices, is off 16 percent from a February peak. Oil prices dropped to $83.23 on Friday, down 24 percent from this year’s peak of $109.77 on Feb. 24.
The key factor at the moment is the Euro crisis; investors are fleeing the euro in favor of the U.S. dollar. A stronger dollar is now weighing on prices of oil and other commodities that are priced in U.S. dollars. Meanwhile, Chinese exports to the Euro zone have declined and contributed to a slowdown in Chinese growth, which in turn could slow Chinese purchases of U.S. commodities and further weaken their prices.
Contact John T. Barone at jbarone@mktvsn.com.
