Corn as a Read on the Markets and World Economy

Six months ago I wrote about the importance of Corn to the financial and economic system, calling it the Rosetta Stone (link below). Whether you are forecasting inflation, fuel costs or sovereign value or the trade off between real and paper assets, the answer can be found in Corn. For many this was a new concept. Six months later it is time to revisit the story.

Corn as Store of Value

Looking at the ratio of the Corn ETF, Teucrium Commodity Trust Corn Fund,$CORN to the SPDR Gold Trust Shares, $GLD, above you can see that it has completely reversed since May and is trending lower. Is it no longer a store of value like Gold? Or is this just a sign that inflation is under control and that Gold has been rising on global fear, reversing the trend?

Corn as Measure of Inflation

The ratio of CORN to the iShares Barclays 20+ Year Treasury Bond Fund, $TLT, shows that it has been heading lower since May. Perhaps this does confirm that real inflation has been falling lower and after a bounce it seems ready to continue lower again.

Corn vs Paper Assets

The ratio of CORN to the S&P 500 SPDR, $SPY, continues to show that the trend has been for real assets over paper assets. Without the longer term perspective, this may not be so obvious given the big move lower throughout September. Now back at the trend line, should it be broken and the ratio continue lower then it would signal a shift back to paper assets. But it appears more likely that it is gathering support to continue higher.

Corn as Measure of Devaluation

Reviewing the ratio of CORN to the Power Shares DB US Dollar Index Bullish Fund, $UUP, shows that since May it has been volatile along with the moves with the US Dollar. After rising recently at the expense of the US Dollar it now shows signs of moving back lower, so it may be predicting Dollar strength.

Corn as Measure of Fuel Costs

Finally the ratio of CORN to the United States Oil Fund, $USO, shows that the CORN price growth has been trailing the cost of Oil since September in a steady down trend, suggesting that fuel is becoming more important that food. This may also be a sign of global fear leading to rising Oil costs as opposed to Corn finally being oversupplied to the world economy.

Corn remains at the center of the financial world, impacted by all events world wide, and thus giving a view into the world economy. What is it telling us now? That there is heightened fear in the world economy that is fueling a continued move from paper to real assets. But also that anticipated low inflation and a strengthening currency require less need domestically to store value in real assets and is now being oversupplied to the world economy. Continue to watch these ratios as they will give a great forecast of the future of the economy and the markets. As these trends go forward they will continue to be leading indicators.

Corn is the Rosetta Stone of the Markets and Economy

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