It seems that commodity research is not widely distributed. From the little commodity research I have read (mostly from Barclays Commodities), there is a lot of data with respect to supply and demand, but there's little to no explanation of commodity price targets. Since commodities don't provide cash flows, its typically hard to value the asset class the same way equities and bonds are valued. Is anyone aware of any commodity pricing models?
Cost is seemingly the only way to come up with a commodity price floor. However cost of extraction data is limited. Some companies make that available in their annual reports but haven't found a resource that aggregates the average cost of extraction. Does anyone have any insight into this?
My own guess is: equities and FI are sold to retail investors, and so a lot of the "research" out there is really marketing materials aimed at the pigeons.
I get all my commodities news, etc., from Barron's.
The thing I like about commodities, especially with oil, is that a lot of factors come into play in analyzing it's price, movement, etc. You simply cannot just pay attention to the numbers in front of you..requires constant analysis on extraneous factors.
Brit holdings.blogspot.com
One method used by pure fundamentalist is regression analysis.
Many ppl create models to anticipate supply, demand, production and stocks. Then you can create S&D curves. to get an idea of price. Ofcourse that does not build in speculation.
for ags one factor you need to constantly watch out for is the climate/weather. el nino la nina etc as of how the expected rainfall would change and how that change would affect the productions; taken into consideration of exports/imports change of major export/import country.
the experienced commodities traders i used to work with don't seem to have a model. they pay most of the attention to SnD changes as well as market dynamics. they just often know what to expect.
what i always heard during the investment meeting is our ag/sugar traders saying oh the demand from X came in stronger (or supply dropped because....) and the farmers are selling backend... stuff like that and then just gave a target price.
there must be some models but i worked for a fundamental house before so i had no insights on that part...
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