October 30, 2018 / 7:08 PM / 10 months ago

CoreCommodity's De Chiara says bull cycle in commods starting

(Reuters) - Commodities from energy to metals and agriculture are in the early stages of a strong upward move, CoreCommodity LLC portfolio manager Adam De Chiara said on Tuesday, as interest rates start to rise and long-standing supply gluts start to dwindle.

Core Commodity Management Co-Founder Adam De Chiara speaks during a Reuters Global Commodities Summit in New York, U.S., October 30, 2018. REUTERS/Brendan McDermid

De Chiara, co-founder of the $4.2 billion CoreCommodity Management LLC, a privately owned investment manager, said global economic growth is the main reason he expects a sustained rally in energy markets including crude oil and natural gas, along with soft commodities like coffee and sugar.

“There are not a lot of people who remember a bull market in commodities,” he said at the Reuters Global Commodities Summit.

While investor interest has largely been focused on equities, he pointed out that the last notable bull run in commodities happened just as stocks went into a down cycle at the end of the 1990s and early 2000s.

De Chiara noted that prices of industrial metals like copper currently trade below production costs while inventories have declined, which should support those commodities.

In addition, more aggressive stances from the world’s central banks should buoy commodities, said De Chiara, as investors look to hedge against inflation.

“Central banks are telling you they want to see inflation,” he said. “When central banks say they want to achieve a certain target, they’re generally successful in doing that.”

De Chiara said natural gas prices are poised to move higher as the United States shifts to becoming a leading world exporter thanks to a shale boom, and after years of weak prices left supply ahead of winter at lower levels than usual. A colder-than-expected winter could prompt a move higher, but he said the longer-term outlook is also bullish.

“On the demand side, natural gas is amongst the best available alternatives for power production” for countries seeking to get away from coal, he said.

The Thomson Reuters/Core Commodity CRB index peaked in July 2008 before bottoming out in 2016. The index has been largely flat this year, though it is up 17 percent since June of 2017.

Reporting By David Gaffen; Editing by David Gregorio

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