Monday, July 7, 2014

Dennis Gartman: Deflation in agriculture coming

Dennis Gartman feels that Deflation is coming to Agriculture and this could in turn benefit the major Food producers whose input costs are going to go down. 

"I think with the size of the crops, it is going to be a huge corn crop. It's going to be a huge soybean crop. It's going to be a reasonably large wheat crop. If you are a company whose major input costs are grains, you're going to have a great year. So I think you take a look at the Kellogg's of the world, the General Mills of the world. I think you take a look at the companies, live stock producers whose input costs are going to be declining. Deflation in agriculture is going to be a real harsh reality and its going to be beneficial to companies for those companies that use corn, soy beans, wheat as their major inputs."

Gartman thinks the companies are not going to reduce their prices and that will benefit their stock prices.
"They're going to keep their price increases in effect, but their input costs are going to go down. Therein lies an increase in their margins over the course of the next year"