Why there’s a negative correlation between agricultural cmdty and inflation?
My understanding is that unstoreable commodities simply aren’t good hedges against inflation - not that they are negatively affected by inflation - I could be way off though.
I think it’s because storable commodities can be stored and benefit an increase in price because of increase in inflation Unstorable commodities are sold at current prices, which will be less in the future
I meant the current dollar value received will be less in real money term VS storable
From Schweser… that pesky commodity “energy”: As an investment, the commodity energy is: A) nonstorable and a hedge against inflation. B) storable and a hedge against inflation. C) nonstorable but not a hedge against inflation.
still doesn’t make intuitive sense. btw the answer i think is b
It’s debatable but the most of energy is still oil, which is storable and a good hedge against inflation
Well, I’ve heard of oil and natural gas as specific energy commodities, not a general commodity called “energy.” Has anyone ever bought “energy”? I mean, I know the energy sector… Anyhow: B) storable and a hedge against inflation. Commodities that are not agricultural products tend to be storable and hedges against inflation. Energy is both storable and its return has been correlated with inflation.
this is just my understanding… Equities are a good inflation hedge, especially when firms can pass inflation on to the consumer Similarly, if a commodity is storable, the producer can pass the inflation to its customers by waiting until he gets a right price (the commodity wont be wasted away by waiting…) however, a non-storable commodity producer cannot do that…he has to sell to what ever the price he gets… basically it depends on the Price elasticity of demand… again, this is just my understanding…not sure if this is exactly the case…