Wednesday, November 10, 2010

Commodities Prices Soar Demand and Speculation of Future Prices Corn Up 39%

Tags: Commodities Soar Scarce Future for Oil, Water, Famines Climate Change Food, Rare Base Metals, Oil Corps Profits Sky High Lower Demand, Uncertainty and Fear

Everyone should have a small amount of commodities in their portfolio. I suspect now is not the time to chase prices. Oil, water, food due to Climate Change, and rare base metals are expected to be increasingly scarce over time. Markets go up and markets go down. When anything is too popular, it is normally better not to become a lemming.

I cannot predict the future and I suspect no one else can. The long term future is getting more predictable and it looks bleak now. Participants in the business of Greed and Financial Assets accumulation ignore the future and counter plans to save the planet. Unless we change, our Democracy will vanish we will go back to 14th Century Europe with billionaires and the Church controlling all our lives in poverty.

Jim Kawakami, Nov 10, 2010,

Posted Nov 10th 2010 12:40PM by Connie MadonpastedGraphic.pdf
Filed under: Major Movement, International Markets, Economic Data, Commodities, Oil, Agriculture, Federal Reserve, ETF

There are two primary forces at work in world economies. At this time they are driving commodities prices higher. One is the continuing need and demand by emerging nations for raw materials, a trend that is not about to subside. The second is the extra pile of money that the US Federal Reserve is printing that is finding its way into the commodity markets, a driving force for higher prices.

Let's take oil as an example. The International Energy Agency said that that China's needs could drive oil to $110 per barrel by 2015, a 27% premium to the current price, as reported in the Wall Street Journal. On Tuesday, the US Department of Agriculture (USDA) cut harvest estimates for soybeans and corn.

In the metals markets, copper climbed 2.2% Tuesday, just pennies away from an all time high. Gold settled at $1,409.80, a new record. Cotton is at a 140 year high. Corn has risen 22% in six weeks.

Now to the $600 billion of extra dollars sloshing around the world. This money is not going to create more jobs. Instead, banks and investors are chasing higher returns in the commodity markets. Year to date prices are:

  1. Cotton is up 100%
  2. Gold has risen 29%
  3. Soybeans are 27% higher
  4. Corn is 39% higher
  5. Copper is up 21%
  6. Crude oil rose 9%

Aside from the big producers, investors are buying commodities through exchange traded funds, (ETFs.) According to Barlcays Capital (BCS.) investors have $320 billion parked in commodities.

These are powerful forces that will dominate worldwide investing. Developing countries like China, India, and Africa have huge populations, each with at least 1 billion. Their need for raw materials is insatiable. Investors looking for opportunities should look to commodity ETFs and companies engaged in raw material production and distribution.

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