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Why Goldman Is Bullish On Commodities. Again
Goldman is bullish on commodities.
In itself, that's not exactly news. Goldman is perennially constructive on commodities. But, in the context of 2024 macro outlooks which continue to flood in, it's worth a mention.
For me, the bank's view is confirmation bias. For a variety of reasons, not least of which are geopolitical tensions and friction around the energy transition (I think it's too late for clean energy, I think episodic bouts of extreme volatility are likely for fossil fuels and I thi
I generally disagree with their flat-to-negative agricultural commodity outlook, albeit for entirely qualitative long-term thematic reasons. There are two reasons I’m bullish ag: 1) the potential for war. We saw what the Ukraine invasion did (and is still doing in certain cases) to global agricultural commodity markets. 2) Global Warming. The planet’s agricultural systems are all located based on historic weather patterns combined with water availability. Both of these are heavily disrupted by Earth’s human population and its propensity for consuming vast amounts of fresh water and lighting volatile carbon-containing molecules on fire. Even in instances where water is abundant, very high temperatures depress agricultural output. For one example, the spring heatwave across Pakistan & India decreased crop yields by ~20%. In extreme heat, plants go partially dormant–regardless of water availability–as an evolved survival mechanism.
This is also why I really like ag-tech. Whoever can develop drought-resistant soy beans or heat-loving cotton will be sitting on a gold mine. That said, I wouldn’t want to be a farmer. It doesn’t help that your crop of choice is up 50% when your harvest was wiped out.