What Is the Bull Market in Burlap Telling Us?

Posted Nov 17th 2010 10:00AM by Connie Madon
Filed under: International Markets, India, Indices, Commodities

We have hundreds of indexes tracking everything that wiggles or moves. We are constantly searching for direction. Where is the market headed? Where is the economy going? Are we still in a recession? Will we see more growth next year? And on and on we go.

Well, here's a unique index -- two indexes in fact -- that track unusual products. The Commodity Research Bureau's raw industrials spot index, which includes print cloth, rosin and wool tops, soared to an all-time high last week, as reported in the Wall Street Journal. The Journal of Commerce/Economic Cycle Research Institute industrial price index, which tracks industrial metals, cotton, hides and tallow, hit a 2010 high last Friday -- just shy of its 2008 peak.

The Economic Cycle Research Institute's index tracks 18 components. Half of them are not traded on exchanges and they are not tied to agricultural or precious metal components.

Now to burlap and tallow. Burlap prices are hitting new highs. Prices are obtained by checking in with bag and paper suppliers. Commercial Bag & Paper's 43,000 yard container of burlap costs $38,000, up from $17,000. A key supplier of burlap is India, but strikes there have disrupted the supply chain, forcing buyers to purchase at higher prices.

Tallow is another off-the-radar commodity. However, it is a key ingredient in industrial soap. More tallow usage indicates that companies are doing more cleaning.

What is this telling us? Lakshman Achuthan, co-founder of the Economic Cycle Institute said, "Global industrial growth is going to revive around the end of this year or early next year."

Tags: burlap, commodities, commodity prices, commodity stocks, featured, inthenews

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Reader Comments (Page 1 of 1)

11-17-2010 @ 12:32PM

Gary Sattler said...

Don't break out the streamers and confetti just yet. We need a consumer break out in order to make any industrial output increases anything more than wishful inventory building. Otherwise, deflation here we come!

11-17-2010 @ 2:35PM

Yon said...

US manufacturing will grow again? With what experienced workers? Experienced unemployeds are over 40 and will not be hired. Too wore out fum strikes. HS graduates can hardly express themselves clearly in English. Industries are unable to obtain financing for payrolls and machinery - or marketing -from tight fisted banks. This here cuntry is gun' third world and President Hussein Obama is writing chillun's books.