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A new era for commodities Cheap resources underpinned economic growth for much of the 20th century. The 21st will be different. NOVEMBER 2011 * Richard Dobbs, Jeremy Oppenheim, and Fraser Thompson Source: McKinsey Global Institute, Sustainability & Resource Productivity Practice In This Article Exhibit: In little more than a decade, soaring commodity prices have erased a century of steady declines. About the authors Comments (2) Has the global economy entered an era of persistently high, volatile commodity prices? Our research shows that during the past eight years alone, they have undone the decline of the previous century, rising to levels not seen since the early 1900s (exhibit). In addition, volatility is now greater than at any time since the oil-shocked 1970s because commodity prices increasingly move in lockstep. Our analysis suggests that they will remain high and volatile for at least the next 20 years if current trends hold-barring a major macroeconomic shock-as global resource markets oscillate in response to surging global demand and inelastic supplies. Back to top Demand for energy, food, metals, and water should rise inexorably as three billion new middle-class consumers emerge in the next two decades.1 The global car fleet, for example, is expected almost to double, to 1.7 billion, by 2030. In India, we expect calorie intake per person to rise by 20 percent during that period, while per capita meat consumption in China could increase by 60 percent, to 80 kilograms (176 pounds) a year. Demand for urban infrastructure also will soar. China, for example, could annually add floor space totaling 2.5 times the entire residential and commercial square footage of the city of Chicago, while India could add floor space equal to another Chicago every year. Such dramatic growth in demand for commodities actually isn't unusual. Similar factors were at play throughout the 20th century as the planet's population tripled and demand for various resource

The recent collapse in commodities prices, and correspondingly even greater falls in the values of commodities stocks, is, ironically, leading towards another global commodities bubble

The critical part reads, "Excess volatility of commodity prices poses risks to growth. We will consider ways to improve the functioning and transparency of global commodity markets, including considering IOSCO work on commodity derivatives"

Most Accurate Agri Commodity trends for Today CASTOR SEED (20 NOV.) TREND: CONSOLIDATE RES1: 4710 RES2: 4610 SUPP1: 4410 SUPP2: 4310 STRATEGY: BUY

"Chinese commodity prices collapsed on the first day of trading after the Lunar New Year break as investors returned to markets gripped by fear over the impact the coronavirus will have on demand in the world's biggest consumer of raw materials. The country's three major commodity exchanges were hit by a fevered bout of selling as they reopened with Chinese traders getting their first opportunity to catch up with losses inflicted on overseas markets while they had been on holiday."

The full impact on copper is not known yet. We will have to wait and see how the health issue impacts manufacturing and also wait to see the China government fiscal response. Seemingly anything else at this time is speculation.

Time will tell and media does overhype. What I found noteworthy that these stories were linked to Dr Copper, which rarely happens. Agreed that we do not need to stir the hive, but I alerted Joe that he may receive lots of interest for the January edition of his index.

The commodity super-cycle is not over, it is just pausing. For the world economy to resume growth of 5 per cent, energy supply must expand by a similar rate. But with lower oil prices and a credit crunch, energy investment is plummeting, suggesting global energy demand will eventually pick up more rapidly than productive energy capacity. Assuming the ongoing global recession does not turn into a multi-year event that pushes energy demand down structurally, steep decline rates could again put upward pressure on oil prices as soon as 2010 or 2011. In particular, if the low oil price/high cost of money environment persists for most of this year and next, our base case scenario for non-OPEC production could prove optimistic, exacerbating the second leg of the commodity super-cycle. If and when the global economy starts to recover, too many dollars chasing too few barrels will only lead to much higher oil prices.

The world's metals producers are still looking to China as the panacea for all ills with the often expressed hope that the country's need to support the domestic metals smelting, refining and steel industries will be the saviour of this sector and supply sufficient demand to support prices in the West. Consequently Chinese data are followed intensely and the latest information suggests that copper, iron ore and steel demand are holding up well - indeed increasing substantially - while aluminium is flat and zinc and lead suffering. But Chinese data requires interpretation and can be misleading as pointed out by Macquarie's Bonnie Liu in her latest China Commodities Weekly research note, and she concludes that there has to be some doubt that the latest extremely strong figures can be maintained. The notes below are abstracted from Macquarie's latest China Commodities Weekly and give us some considerable food for thought.

I love stories about the unintended consequences of rising commodity prices. (Here's one, and here's another.) Now Susan Saulny writes in the Times about another strange trend driven by high commodity prices: the rampant theft of cars' catalytic converters, which contain trace amounts of platinum, palladium, and rhodium.

"These days a larger proportion of African economies save money during the good times, then spend during bad. As a result, a commodity-price downturn need not provoke a recession: the government can take up some of the economic slack. "

"Warburg Pincus Senior Advisor Bill Janeway and Bloomberg Intelligence's Kenneth Hoffman discusses commodities, oil and the Chinese economy on "Bloomberg Surveillance.""

Copper prices tumbled to a five-week low Thursday on expectations that falling demand from China and a slowdown in the U.S. housing market will lead to a surplus of the metal. Other commodities traded mixed, with crude oil rebounding slightly and gold, silver and soybeans falling. Corn and wheat futures rose. China, the world's biggest buyer of copper, has been importing less of the metal since the completion of most major construction projects heading into the Beijing summer Olympics. Copper imports in June fell 20 percent compared to May, China's custom's agency said this month. As a result, stockpiles of the metal have swelled in Shanghai and London, helping drive down prices.

Global miner Rio Tinto expects 2009 to be a rough year in terms of both prices and volumes for key commodities, the firm's chief economist said on Wednesday