Commodity Demand Price Pressures

The high prices for commodities will likely be with us for a very long time.

The reason is simple. Fast growing economies in China, India, Latin America, and elsewhere are creating a huge demand for more and better food as well as for all types of consumer products.

Rampant monetary expansion is also contributing to the bullish scenario. The following comments are from analyst Puru Saxena, writing in The Daily Reckoning.

“If you have invested in commodities, you will be thrilled to learn that apart from energy, the inventory levels of other resources such as base metals or food are also extremely depleted. And these stockpiles are low due to the sudden and unexpected surge in demand brought about by the rapid industrialization and urbanization of China, India and parts of Latin America.

A growing percentage of the three billion people in the “emerging” economies are now putting immense pressure on the planet’s
resources as consumers, and the scramble to find more commodities is on.

Exploration activity, whether for metals or energy, is at multi-year highs and I suspect that billions of dollars will be spent in the years ahead as nations desperately look for additional resources to feed demand.”

Until the world economics enter a deep and prolonged recession the pressures from demand growth in the face of a shortage of commodity supplies will keep an upward bias to prices.

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