Port St. Lucie, FL (PRWEB) October 17, 2006
Which commodity sector will lead the way for the next leg of the current commodity bull market?
It all began back in 1998 with approximate prices of $10 crude oil and then $260 gold and $4 silver. The US dollar began to decline while at the same time China and India began to make the push to industrialize their countries and became gluttonous consumers of commodities. These two countries' demand for raw commodities began a demand driven commodity bull market that is still in progress. Considering that nearly ½ of the entire world's population lives in China and India, one can imagine if just one extra chicken is consumed by all those people per year the impact it would have on corn and soybean future prices. Assume it takes ½ a bushel or 30 pounds of corn or soy meal to raise one mature chicken. What if every other family bought a car? Private car ownership is increasing by an estimated 15% per year in China. How would that affect energy future prices and industrial metal future prices? China is already a huge consumer of just about everything and is currently at a record high demand level for petroleum, its products and copper. The point is that India and China alone probably have the ability to create and sustain a demand driven commodity bull market for many years to come.
Today, gold futures prices are more than twice as high as they were back in 1998. Silver futures are nearly three times as high and crude oil futures are six times as high. Grain futures however, are very near their 1998 prices. This is in spite of the fact that the Government is pushing ethanol and bio diesel production and their use in the United States. South America is currently dealing with a severe drought in Argentina (#2 world corn exporter) and Brazil (#1 world soybean producer) is focused on being independent of foreign oil by using 50% of its sugar crop for ethanol and a large portion of its soybeans for bio diesel. Is it the grain futures markets' turn to double in price like so many other commodities have?
Commodity trading has gained quite a bit of popularity with the metals and energy bull markets grabbing most of the spotlight even though sugar futures, orange juice futures and copper futures recently set all time price highs. Commodity traders are watching intently as energies and metals are currently correcting from their highs. Grains and many of the food futures have not seen similar huge rises in future prices. Futures traders and commodity fund managers may be ready to buy back into the long term commodity bull market soon.
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