The dollar carry trade has been the dominant factor in the commodity markets too. The broader fundamentals with a nascent recovery are still weak to justify a massive rally as witnessed in the past year. Natural gas is one exception and it is trading near its lifetime lows. It could be prudent to invest for the long term in companies dealing with this commodity.
Crude oil is range bound between US $75 83 as the bubble in it is being pushed in and out by very powerful forces. While the emerging markets with significant growth and increasing need for energy are inside the bubble, expanding it with the surfeit of US dollars due to quantitative easing, the private sector and the consumers in the USA are deleveraging and reducing their demand for fuel. Albeit this tug of war is expected to continue in the short-term future, a spike to US $100 a barrel would be a trigger that could reverse the dollar carry trade as the convalescing world economy cannot afford it and would slip into a recession. The first signs of it would be a massive winding down of the global airline industry.
Simply put, inflation is too much money chasing too few goods and food items are the first on that list. Prices of sugar and wheat are expected to continue their upward rally. Livestock farming is turning out to be a loss making industry with rampant inflation in the prices of grains. The prices of livestock based products could face significant pressure as the industry is going through massive deleveraging as farmers give up on livestock cultivation. Indian investors are cautioned against trading in food commodities due to the political storms that are forming with rising inflation.