Commodities Have Further to Fall

Countertrend rally? Whenever I see the ag stocks up, I am now tempted just to fade them. I know that has gotten knee-jerk, and Merrill makes some good points this morning on the group and on the estimates of Monsanto (MON - commentary - Cramer's Take).

But we know that nobody seems to care anymore, even as I think there is a great secular long-term famine case that has to be addressed.

We have become convinced, en masse, that no pricing will hold up in a commodity world, because of a host of reasons: European interest rates being kept too high, the surfeit of oil, the lack of gold demand, the absence of China for what seems like months now.

How do we know this? Because of the action in the steels. There has been absolutely no degradation whatsoever in steel pricing, none, but the stocks have been crunched beyond recognition. Nucor (NUE - commentary - Cramer's Take) has gone from $83 to $51, for heaven's sake. Given that decline in the face of rising prices for NUE's product, who the heck cares about fertilizer and seeds? And the decline in oil has taken the luster off ethanol anyway.

We are in the "total guilty until proven guilty" moment when it comes to commodities. I know that some have gotten so cheap -- should natural gas have been down almost 50% and high-quality companies that did better than earnings estimates, like Anadarko (APC - commentary - Cramer's Take), fallen almost a like amount, peak to trough?

Nah. Nobody cares. I'd rather own poorly performing banks and homebuilders -- how bad is that Goldman (GS - commentary - Cramer's Take) quarter going to be! -- than great-performing commodities, until the valuations have fallen to where the enterprise value of the company vastly exceeds the stock price times the shares outstanding.

In other words, much further to fall.

At the time of publication, Cramer was long Goldman Sachs.

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