Richard Gray: February 2008 Archives
Whenever crop prices rise
analysts are often asked to predict how long the rise will last. Making price
forecasts involves looking at past trends, current drivers and commodity price
cycles. Commodity price cycles typically follow the pattern of long periods of
low prices with short price peaks in between the price troughs. Strong prices
are short-lived because high prices encourage investment, which increases
production, resulting in an oversupply and subsequent price decline. Is this
current price peak just another blip in the commodity cycle or has something
changed? I would argue these high prices might last longer because of three
factors in particular: (1) growing economies in China and India; (2) Hubbert's
Peak, and; (3) U.S. biofuel policy.
Continue reading Will the boom last?....Maybe..
