Mainstream Asks, "Are You Ready for the Commodities Supercycle?"

The time to ask that question was over a year ago. What do waves show next?

by Nico Isaac
Updated: September 30, 2021

Fall is a time of transformation, albeit temporary. For a brief window, before switching back, the leaves alter their colors and children morph into pretend Halloween monsters and far-apart families come together as one for the holidays.

And, according to a September 22 Yahoo! Finance, this fall is likely to witness a hugely positive change for the global commodities sector. From the article:

"Are Your Ready for the Commodities' Supercycle?

"The price rise in commodities since [the start of 2021] has so far outperformed the last supercycle, which started in the early 2000s and was driven by emerging markets (China, primarily, but also Brazil, Russia, and India)."

It may be a moot point.

As this September 27 Wall Street Journal explains, even if investors were ready for a supercycle party, they can't afford the entrance fee.

Here's the elevator pitch:

Soaring commodity prices means small traders must borrow more money to finance their positions.

But lending institutions have increased their capital requirements while reducing their credit lines.

Thus, an "unusual situation" whereby the "gap between the haves and have-nots in commodity markets" is growing larger by the day.

All of this to say: The time to "get ready" for a commodity supercycle was BEFORE prices burst out to the upside and banks reigned in their lending to small investors.

In short, that would've meant going back to April 2020 when the CRB touched down at a 2-decade nadir and unhearing the widespread doom-and-gloomsaying about the future of the entire commodities sector at the mercy of the pandemic.

For instance, this dismal April 23, 2020, World Bank commodities outlook:

"The global economic shock of the COVID-19 pandemic has driven most commodity prices down and is expected to result in substantially lower prices over 2020.

"In addition to the devastating human toll, the economic impact of the pandemic will dampen demand and cause supply disruptions, negatively affecting developing countries that rely heavily on commodities."

And this May 25, 2020, mining report, which described a "new reality" of cratering raw materials:

"Commodity prices to drop as depressed demand disrupts supply... The coronavirus crisis has affected all markets and has made double-digit year-on-year commodity price falls the new reality."

The mainstream chorus was loud and clear on their bearish stance for commodities. But their voice was NOT the only one in town.

Shortly after the CRB Index tapped its final 20-year low in April, our June 2020 Monthly Commodity Junctures published this labeled chart of the CRB index.

There, editor Jeffrey Kennedy showed prices at or near the end of a wave 2 decline. The market's next major move would be a third wave rally. In Jeff's words:

"I like the upside in the CRB Index. We'll be looking for significantly higher prices moving forward."

From there, the CRB's boom kicked into overdrive with no turning back. By September 2021, the index had doubled in value from its low, touching its highest level in 7 years.

Now, the September 22 Yahoo! Finance article ends with this cliffhanger:

"What makes a supercycle stand out is not how quickly prices rise, but how long those prices continue to increase. The jury is still out."

Actually, the jury is in! If you know even the basics of Elliott wave analysis, you can tell by looking at the chart above that the wave pattern has more to go. For details, our September Monthly Commodity Junctures presents updated price charts of the CRB, which reveal the likely path the bellwether index will take in the months and years ahead.