I just listened to Bill Lapp, an economist with Advanced Economic Solutions speak about the outlook for commodities in Edmonton. Lapp was very interesting, candid and provided great insight into the commodity market.
The key points that Lapp focused on were:
- Brazil, Russia, India and China have led the world growth over the last 10 years.
- The rising US deficit is going to be an ongoing concern. As the US dollar weakens commodities should strengthen.
- Commodities tend to jump and then plateau. He showed a chart of corn prices back to the 1800’s and showed the group that this has been in case with corn over history.
- World coarse grain usage is now rising much faster than long term gains. The result is going to be acre battles between major crops. For example, corn and soybeans.
- The ethanol industry in the US has moved from the gold rush to significant financial issues. Currently, 20% of the ethanol production capacity is idle in the US.
- The US cattle and chicken industries are under significant financial pressure.
- Food use of soy oil is going to decline in the US for the fourth consecutive year due to the growth of canola and palm oil. In the US consumers view, canola is a healthier oil.
- The North American recession has created real financial trauma. The longer the economy is slow, the more likely the US moves to a protectionist agenda of which Lapp is extremely concerned about.
If you are ever presented with the opportunity to hear Bill Lapp speak I encourage you to attend.