# The Kiwi Kommodity Klub



## RussianParasite (Oct 20, 2021)

Hello my fellow Bidness-minded Kiwis.

I have noticed that there are threads on stocks, crypto, and precious metals (among others) but that we do not have a central thread in which to discuss commodities/ commodity markets. As such, I have decided to start the KKK.

This seems like a good time to make such a thread as there has been much discussion around inflation (which is both partially affecting and being driven by high commodity prices/shortages). Anything that interests you about commodities or their markets can be posted here. As a general rule, let’s  define what commodities actually are and limit discussion to those topics:

1. Agricultural products (feed/animals/crops/fertilizers/coffee/corn/cotton etc.)

2. Industrial Metals (Copper, lead, zinc, tin, steel, aluminum, etc. Preferably not gold/silver or other precious metals as they have limited industrial use generally speaking)

3. Lumber and related products (paper)

4. Crude oil and derivatives (why my gas prices so high?)

5. Power prices (related to number four usually but have interesting market dynamics of their own)

We can of course add others as I am probably missing a few. Overall, though, I think it could be a fun/informative discussion. I aim to run a poll once every quarter or two as it could be fun to see where everyone thinks prices are going/ what is happening in the markets.


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## 2 Guys 1 Amhole (Oct 20, 2021)

Chicken prices have blown up this year. 
It’s a staple in most of my meals, so I noticed immediately when that started to happen. 

A year and a half ago I could get it for about 1.13 per lb, and now it is hovering around 1.93 per lb. It is also being sold out and is missing from the shelf most of the week. You have to go to the market at the right time or you’re out of luck.


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## RussianParasite (Oct 20, 2021)

Chillguy69 said:


> Chicken prices have blown up this year.
> It’s a staple in most of my meals, so I noticed immediately when that started to happen.
> 
> A year and a half ago I could get it for about 1.13 per lb, and now it is hovering around 1.93 per lb. It is also being sold out and is missing from the shelf most of the week. You have to go to the market at the right time or you’re out of luck.


I noticed this with chicken wing prices at some of my local restaurants. Absolutely crazy expensive now. 

Just from some preliminary reading (I don’t know much about the market for chicken) it appears that a combination of the “chicken sandwich wars” between fast food restaurants has driven up demand like crazy. Meanwhile, there is a shortage of workers in the poultry industry. The two have worked to cause something like a 60% increase year-on-year price spike and now they have broken their prior all-time-high.


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## 2 Guys 1 Amhole (Oct 20, 2021)

Now that I think about it, it’s the same with Bacon. I don’t get it often because it’s so fattening, but recently any time I’ve thought to treat myself and buy a package of it, the shelves are totally empty. It’s been this way for weeks now. 
And it’s not just meat and produce, I’ve noticed odds and ends being completely sold out. Furniture polish, for example. I have no idea if that’s just a coincidence or not. I haven’t looked into it. I don’t think it is, though, because I’ve never in my life had trouble finding it in stock before.


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## OfficerBagget (Oct 20, 2021)

Bacon, Chicken and Canned goods are in very high demand. Cleaning Supplies too. 

Only had issue with Bacon tho. I've found all other cuts of Pork are still well stocked.

Alot of people have been staying home for 2 years now and Home cooking is a growing trend. I don't know if the shortages is partially to do with that.

But you mentioning Furniture Polish, for 2 weeks now I've not found Furniture polish stocked. And most Industrial Metals are in high stock, But Lumber prices are growing like crazy, getting wood at most hardware stores is getting very pricey


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## RussianParasite (Oct 20, 2021)

OfficerBagget said:


> But Lumber prices are growing like crazy, getting wood at most hardware stores is getting very pricey


That’s weird because bulk lumber prices crashed back in June and are still trading at or below pre-pandemic levels. Metals in general are way, way higher in price than they used to be.


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## OfficerBagget (Oct 20, 2021)

RussianParasite said:


> That’s weird because bulk lumber prices crashed back in June and are still trading at or below pre-pandemic levels. Metals in general are way, way higher in price than they used to be.
> 
> View attachment 2643271


Yea I looked into it. Lumber prices are so high in my area because of growing construction. Property prices are getting ridiculous where I'm at.


Which you should put Real Estate on your list too lol


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## Uncle Sid (Oct 20, 2021)

I used to collect pure Canadian nickels when the spot price was 4x face value but the nickel market crashed so I dumped them all into a CoinStar machine.


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## mindlessobserver (Oct 21, 2021)

Beef and Chicken has gotten pretty retarded lately. Pork seems to be trading at about the same though. Curious if there is a structural reason for that or if pork just has a supply glut and it's going to follow along.


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## Audit (Oct 21, 2021)

China has been looking to import a lot of beef lately, per Reuters, so beef costs should rise due to foreign competition for US product. Pork and chicken seem to be more of a local product. I've been getting pork for <$1.00 for large volume cuts locally. Chicken is roughly the same for a whole bird unless you want it butchered. Breasts and wings are silly expensive >$2.00 by comparison. Not sure if this is at all labor associated. There have been many reports of meat processing labor shortages during the pandemic. Meat packing jobs have historically paid more than minimum wage (~$18/hr afaik), so maybe they're finding less stressful jobs in the current labor market?


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## tehpope (Oct 21, 2021)

I think Crude will get to $100 a barrel by the end of the year. I think a few major banks have called that too earlier in the year.


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## mindlessobserver (Oct 21, 2021)

tehpope said:


> I think Crude will get to $100 a barrel by the end of the year. I think a few major banks have called that too earlier in the year.


Which absolutely astounding news for Russia. Ironic considering all the shrieks about Trump being a Russian plant. Biden has done more for Putin in 1 year then Trump did in 4.


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## Simple Moving Average (Oct 21, 2021)

tehpope said:


> I think Crude will get to $100 a barrel by the end of the year. I think a few major banks have called that too earlier in the year.



Scale out target is $120 here.


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## 69ing Ur Mom (Oct 21, 2021)

Coal prices ass blasting China's ability to keep the power on needs to be mentioned.

Power generation contracts were set when coal prices were lower. Now power companies are operating at a loss, so they cut output to reduce that loss.

I'm hopeful prices stay high all winter.













						Coal PRICE Today | Coal Spot Price Chart | Live Price of Coal per Ounce | Markets Insider
					

Coal Price: Get all information on the Price of Coal including News, Charts and Realtime Quotes.




					markets.businessinsider.com
				












						More Power Outages as Communist China Suffers From Coal Shortage - Vision Times
					

On Oct. 11, Liaoning province in China issued a level two alert for power shortage. Liaoning is part of China's rust-belt industrial region. It is the largest




					www.visiontimes.com
				












						Explainer: Why Is There A Power Crisis In China?
					

A post-pandemic export boom, coal supply shortages, government emissions targets and inefficient renewables sources have all been blamed for outages that have seen the lights turned out in parts of the world’s second biggest economy




					www.asiafinancial.com


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## mindlessobserver (Oct 21, 2021)

69ing Ur Mom said:


> Coal prices ass blasting China's ability to keep the power on needs to be mentioned.
> 
> Power generation contracts were set when coal prices were lower. Now power companies are operating at a loss, so they cut output to reduce that loss.
> 
> ...


It's almost like all critical commodities denominated in dollar's are....inflating....


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## 69ing Ur Mom (Oct 21, 2021)

mindlessobserver said:


> It's almost like all critical commodities denominated in dollar's are....inflating....


I think the main driver of price is supply and demand combined with supply chain issues.

China has reduced coal as a percentage of power generation. However, total usage of coal has increased. This while global production has been flat since 2011.










						Coal and lignite Production Data | World Coal Production | Enerdata
					

Coal production in the world. Coal Lignite statistics: percentage best producers, analysis on world production and graphs provided by Enerdata.




					yearbook.enerdata.net


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## RussianParasite (Oct 21, 2021)

69ing Ur Mom said:


> I think the main driver of price is supply and demand combined with supply chain issues.
> 
> China has reduced coal as a percentage of power generation. However, total usage of coal has increased. This while global production has been flat since 2011.
> 
> ...


Totally. There is also the fact that not long ago they completely soured relations with Australia, which was a huge coal provider. Now they are playing buddy buddy with them again in an attempt to make things a little better.

The power shortages in China are a massive supply risk to manufactured goods all over. Shit is going down over there and it honestly makes me kind of nervous.


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## 69ing Ur Mom (Oct 21, 2021)

RussianParasite said:


> Totally. There is also the fact that not long ago they completely soured relations with Australia, which was a huge coal provider. Now they are playing buddy buddy with them again in an attempt to make things a little better.



I didn't include that because I'm not sure how much that has an impact on the price of coal.

China banned Australian coal because the Aussies were asking questions about Covid's origin. The problem with that is the power plants on the east coast of China are setup to use Australian coal, which burns hotter than domestically produced Chinese coal.

The power plants need to be retrofitted in order to use domestic coal. That's not going to happen when producing electricity will cause losses.

Australian coal is also cheaper to transport to the east coast of China than the coal from the western part of the country. No one wants to send an empty container ship back to China.

It doesn't matter if China wants to play nice as Australia has already found other market for their coal. The CCP widely overestimated their power in this conflict.









						How One Australian Coal Giant Turned China’s Ban Into a Win
					

China’s ban on Australian coal imports has proved a boon for Sydney-listed Coronado Global Resources Inc., one of the world’s top producers of the metallurgical variety that’s key to steelmaking.




					www.bloomberg.com
				






RussianParasite said:


> The power shortage in China are a massive supply risk to manufactured goods all over. Shit is going down over there and it honestly makes me kind of nervous.



China is less of a supply risk every day. Trump was actively trying to get companies to get their production out of China. Japan had (has?) a program where they would pay half the cost of companies bringing production back home.

Even without a governmental push, everyone has finally realized they're never going to have access to the Chinese market. Hollywood is a well known example. For manufacturers of goods, counterfeits and copies are going straight out the back of factories.

You'll see more goods coming from Vietnam, Thailand, Laos, Cambodia, and India in the future.

*I would be more concerned about the price of iron ore collapsing *should there be any slowdown in property development in China. That appears to be happening as Evergrande and other Chinese developers look like they are going to be bankrupt soon.









						Why China’s property market can expect a further slowdown
					

Even before Evergrande’s troubles, developers were taking steps to reduce leverage to meet new rules, a tightening of mortgage approvals had dampened housing demand and market concerns over default risks had led to higher financing costs.




					www.scmp.com


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## RussianParasite (Oct 21, 2021)

69ing Ur Mom said:


> I would be more concerned about the price of iron ore collapsing


Interesting stuff all around, thanks for the information especially around coal. Iron ore is something I know a fair deal about though, and the price collapse is directly linked to the aforementioned power shortages in China. 

Essentially, the CCP is telling manufactures, including steel manufactures, to stop operating at full capacity so that power can stay online for residential use. As the bulk of their steel making capacity is done at Blast Furnace/ Basic Oxygen Furnace operations, this puts a huge dent in iron ore demand because this process relies heavily on iron ore as an input as opposed to, say, steel scrap metal. Yeah, iron ore collapsed from like $200/t to around $100/t (more as of today) , but just a couple of years ago a $90/t price for iron ore was considered very high even after the collapse of Vale’s huge tailings dam in Brazil.

It’s a “price collapse” in the sense that prices fell quickly, but they still remain at historically elevated levels. I’m sure freight costs play a role here, but it still illustrates that iron ore demand and supply— due to a variety of factors— will not reach a balance in the next few months.


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## Secret Messages (Oct 22, 2021)

what's up with oats


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## Simple Moving Average (Oct 22, 2021)

BucolicVisage said:


> View attachment 2647399what's up with oats



The price?


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## 69ing Ur Mom (Oct 22, 2021)

BucolicVisage said:


> View attachment 2647399what's up with oats


It looks like oat production fell about ~3% of the expectation while demand slightly rose. I couldn't find any reliable production numbers, but the USDA grain report comes out on Nov 9th.

Inflation is playing a part in the increase in price. You can see it at the grocery store with higher prices/smaller sizes. That could account for 10-25% of the price increase? (I pulled those number out of my ass.)

The bigger issue is the incompetence surrounding going green. Natural gas is used to generate electricity, heating, *and the production of fertilizer*.

Natural gas is usually produced in conjunction with oil drilling. Drops in oil production due to legislation or price will carry over into the natural gas market. Production has not been able to keep up with demand.









						Natural gas – Global Energy Review 2021 – Analysis - IEA
					

Global Energy Review 2021 - Analysis and key findings. A report by the International Energy Agency.




					www.iea.org
				




As a result here are the current natural gas prices:











						Natural gas | 2022 Data | 2023 Forecast | 1990-2021 Historical | Price | Quote | Chart
					

US natural gas futures rose to around $3.9 per million British thermal units after output fell during the New Year's weekend as cold weather froze some production wells in Texas, New Mexico and Colorado. Last year, natural gas surged about 47%, the most in five years after a brutal winter that...




					tradingeconomics.com
				




The fast run up in price means that it is not economically viable to produce fertilizer. This has pushed fertilizer prices up as people are expecting supply shortages. Diesel has also gone up in price.

When the two biggest inputs for grain production increase in price, the price will go up. 2022 is looking like it is going to be an expensive year for food.









						Fertilizer prices soaring as natural-gas rally adds to 'perfect storm'
					

Fertilizer prices are on fire, and a surge in natural-gas will only increase the pain for farmers.




					www.marketwatch.com
				









						Individual news
					

Individual news pages




					www.icis.com


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## Vexillology (Oct 22, 2021)

69ing Ur Mom said:


> When the two biggest inputs for grain production increase in price, the price will go up. 2022 is looking like it is going to be an expensive year for food.


Not to mention the political factors. Customs and excises are ramping up in major importers and exporters, major players like China are huge wildcards. Long-term contracts could be severely undervalued.

It seems like most people prefer short-term (mostly monthly) contracts. What kind of time horizons do you guys look at for futures? I'm curious who else likes to take an occasional risk on contracts with distant end dates.


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## RussianParasite (Oct 22, 2021)

Vexillology said:


> It seems like most people prefer short-term (mostly monthly) contracts. What kind of time horizons do you guys look at for futures? I'm curious who else likes to take an occasional risk on contracts with distant end dates.


Most futures contracts are for three months out in most markets. Many are futures are now in backwardation which is expected with these crazy high price levels further out though as you mention. It’s a gamble depending on how high you think inflation and supply chain bottlenecks will keep prices high. A lot of money to be made by getting short in theory though heading into 2022.

I can’t trade most commodities or commodity stocks due to legal restrictions around my line of work  I’d be curious if any one here takes a position though.


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## 69ing Ur Mom (Oct 22, 2021)

Vexillology said:


> Not to mention the political factors. Customs and excises are ramping up in major importers and exporters, major players like China are huge wildcards. Long-term contracts could be severely undervalued.


This is a great point. Everyone's pissed at China and now is a great time to get rid of the CCP. The plan looks to be to deplete China's foreign reserves to cause food and energy shortages.

That's why there's such strong restrictions on removing capital and travel from China. No one is going to accept payment in RMB. $3.2T in foreign reserves won't last long with high inflation, high commodity prices, and 1.4 billion people to feed.






						China Foreign Exchange Reserves | 2022 Data | 2023 Forecast | 1980-2021 Historical
					

Foreign exchange reserves in China inched up to USD 3.222 trillion in November of 2021 from USD 3.218 trillion in October, the second consecutive month of rising reserves and slightly higher than market forecasts of USD 3.212 trillion. Meanwhile, the value of gold reserves increased to USD...




					tradingeconomics.com
				




High commodity prices are likely what will break the Chinese housing market ponzi scheme. Housing prices aren't going to go up when food prices are rapidly rising and factories can't keep the power on.










						Can China’s outsized real estate sector amplify a Delta-induced slowdown? | VOX, CEPR Policy Portal
					

The Chinese economy was able to sharply rebound from the Covid pandemic, helping to sustain a housing boom. The country faces a multitude of challenges over the medium term, however, on top of the much more virulent Delta variant. This column argues that the footprint of China’s real estate...




					voxeu.org


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## Simple Moving Average (Oct 22, 2021)

Vexillology said:


> Not to mention the political factors. Customs and excises are ramping up in major importers and exporters, major players like China are huge wildcards. Long-term contracts could be severely undervalued.
> 
> It seems like most people prefer short-term (mostly monthly) contracts. What kind of time horizons do you guys look at for futures? I'm curious who else likes to take an occasional risk on contracts with distant end dates.



Present. PM me if you have any questions.


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## 69ing Ur Mom (Oct 23, 2021)

The USDA Cold Storage report released yesterday is interesting. People are always sperging out about food shortages, without including any numbers.

Around me chicken has been more expensive. I've basically written off bacon as it has increased in price while switching from 16oz to 12oz packages.

Monday the Poultry Slaughter report comes out. Wednesday is Livestock and Meat Domestic Data. If production in those reports is also down, I would expect food prices to continue to rise.

Is that a recipe for stagflation?



> September 2021 Highlights
> 
> *Total natural cheese stocks* in refrigerated warehouses on September 30, 2021
> were up 2 percent from the previous month and up 8 percent from September
> ...








						Publication | Cold Storage | ID: pg15bd892 | USDA Economics, Statistics and Market Information System
					






					usda.library.cornell.edu
				





I'd also like to know if anyone has any good investment ideas based on secondary effects of rising food prices. My first thought is that discretionary spending should decrease, but I'm not sure if that's the case.

Annual numbers aren't very helpful as no one was buying things after the lockdowns started. Now people appear to be spending at around pre-pandemic levels?






						Page not found | U.S. Bureau of Economic Analysis (BEA)
					






					apps.bea.gov


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## 69ing Ur Mom (Oct 25, 2021)

Poultry Slaughter report​
High chicken prices make sense when the number of mature chickens is down more than 10% from a year ago. The images are large to include the headings. Look at the mature heavy chickens and they're down in terms of live, refrigerated, and frozen count.











> *Ready-to-Cook Weight Up 4 Percent from Last Year
> 
> August 2020* contained 21 weekdays (including 0 holidays) and 5 Saturdays.
> *August 2021* contained 22 weekdays (including 0 holidays) and 4 Saturdays.
> ...








						Publication | Poultry Slaughter | ID: 3197xm04j | USDA Economics, Statistics and Market Information System
					






					usda.library.cornell.edu
				




USDA Estimated Live Poultry​Current estimates don't look like there has been any meaningful gain on production.



> NW_PY016
> Atlanta, GA          Wed. Oct 20, 2021          USDA Market News
> 
> MISC. POULTRY: Weekly Estimated Slaughter of U.S. Broiler/Fryers and Fowl (Wed)
> ...





			https://www.ams.usda.gov/mnreports/nw_py016.txt
		


Future and Cause(s)?​I don't see how chicken prices are going to come down heading into winter. Production is stable through, so I would only expect large price increases if there is reduced beef and pork production.

Higher fuel and *feed costs will put upward price pressure on chicken*. However, I think that the 11% drop in production is a bigger reason why chicken went from $0.99/lb to $1.99/lb around me.

Everyone seems to be blaming the winter storm in February that caused power outages in Texas. The claim is that it disrupted slaughter house operations. Production had to be cut because the processing capacity didn't exist?

I don't find that explanation to be very compelling.

*Edit:* I've been trying to find estimated cost breakdowns on broilers. Turns out feed is 70-80% of the cost. I now think chicken will be getting more expensive.






						SAGE Journals: Your gateway to world-class research journals
					

Subscription and open access journals from SAGE Publishing, the world's leading independent academic publisher.




					journals.sagepub.com
				












						Winter storms disrupt poultry production
					

Preliminary data indicates a 43.9% year-over-year decrease in broiler processing volumes.




					www.feedstuffs.com


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## eternal dog mongler (Oct 25, 2021)

69ing Ur Mom said:


> I'd also like to know if anyone has any good investment ideas based on secondary effects of rising food prices. My first thought is that discretionary spending should decrease, but I'm not sure if that's the case.


I'm shorting Darden.

My gut feeling is that overall food spending as a % of income will be the same but people will move more towards home-cooked meals and cheap fast food rather than sit-down restaurants. Currently the average person spends about 10% of their income on food. In the 70s where it was peak food prices they were still only spending 15%, so I don't think it will have that much effect on discretionary spending.


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## 69ing Ur Mom (Nov 6, 2021)

69ing Ur Mom said:


> This is a great point. Everyone's pissed at China and now is a great time to get rid of the CCP. The plan looks to be to deplete China's foreign reserves to cause food and energy shortages.
> 
> That's why there's such strong restrictions on removing capital and travel from China. No one is going to accept payment in RMB. $3.2T in foreign reserves won't last long with high inflation, high commodity prices, and 1.4 billion people to feed.
> 
> ...


I'm not the only one that thinks China is having problems with foreign reserves.


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