Higher commodity prices for food and fuel a fact for the future
New York, NY, United States (AHN) – Soaring commodity prices are wreaking havoc on consumer’s budgets here in the U.S., but experts say not to expect them to go down because the culprit is increased global demand for food and fuel.
Increased demand from population growth in developing nations is not only causing prices to increase but it is also causing a scarcity of resources, according to Jeremy Grantham, who helped found Boston-based GMO asset management firm.
Grantham says that population growth and the rise of India, China and Brazil have caused a shift in balance in the world that has resulted in increasing prices for food, energy and metals.
Those factors are contributing to soaring global prices for those commodities. Although some people have blamed speculation in commodity markets or the fiscal policies of some governments or central banks, population growth is also a driving force in pushing prices upward. That means that if even commodity markets crash, prices will not stay far down for long, Grantham says.
Grantham notes that in the past century commodity prices declined by 70 percent because of economies that were achieved in using materials more efficiently or substituting materials. However, he said that trend is reversing as we reached the end of being able to achieve efficiencies at a time when the world population was growing.
In addition to global population growth, people in developing nations are earning more and consuming more as a result.
In his April 2011 newsletter, Grantham warned that it was “time to wake up” because “the days of abundant resources and falling prices are over forever.”
“The world is using up its natural resources at an alarming rate, and this has caused a permanent shift in their value,” Grantham wrote. “We all need to adjust our behavior to this new environment. It would help if we did it quickly.”
Grantham summarized the problem:
- Until about 1800, our species had no safety margin and lived, like other animals, up to the limit of the food supply, ebbing and flowing in population.
- From about 1800 on the use of hydrocarbons allowed for an explosion in energy use, in food supply, and, through the creation of surpluses, a dramatic increase in wealth and scientific c progress.
- Since 1800, the population has surged from 800 million to 7 billion, on its way to an estimated 8 billion, at minimum.
- The rise in population, the ten-fold increase in wealth in developed countries, and the current explosive growth in developing countries have eaten rapidly into our finite resources of hydrocarbons and metals, fertilizer, available land and water.
- Now, despite a massive increase in fertilizer use, the growth in crop yields per acre has declined from 3.5% in the 1960s to 1.2% today. There is little productive new land to bring on and, as people get richer, they eat more grain-intensive meat. Because the population continues to grow at over 1%, there is little safety margin.
- The problems of compounding growth in the face of finite resources are not easily understood by optimistic, short-term-oriented, and relatively innumerate humans (especially the political variety).
- The fact is that no compound growth is sustainable. If we maintain our desperate focus on growth, we will run out of everything and crash. We must substitute qualitative growth for quantitative growth.
- But Mrs. Market is helping, and right now she is sending us the Mother of all price signals. The prices of all important commodities except oil declined for 100 years until 2002, by an average of 70%. From 2002 until now, this entire decline was erased by a bigger price surge than occurred during World War II.
- Statistically, most commodities are now so far away from their former downward trend that it makes it very probable that the old trend has changed – that there is in fact a Paradigm Shift – perhaps the most important economic event since the Industrial Revolution.
- Climate change is associated with weather instability, but the last year was exceptionally bad. Near term it will surely get less bad.
- Excellent long-term investment opportunities in resources and resource efficiency are compromised by the high chance of an improvement in weather next year and by the possibility that China may stumble.
- From now on, price pressure and shortages of resources will be a permanent feature of our lives. This will increasingly slow down the growth rate of the developed and developing world and put a severe burden on poor countries.
- We all need to develop serious resource plans, particularly energy policies. There is little time to waste.
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Commodity prices soar as investors seek hedge against global instability
Washington, DC, United States (AHN) – Global economic and political instability has made paper money less attractive to investors who are now driving up prices for commodities such as oil, precious metals and crops.
Sovereign debt risk in Europe and the U.S., coupled with Japan’s post-earthquake and ongoing nuclear crisis on top of political instability in the Middle East, is behind investor decisions to put their money into commodities.
That much liquidity in commodity markets is pushing commodity prices to high levels.
Wednesday morning trading in London saw gold reach a new record nominal high of $1,460.92 per ounce while silver hit a 31-year nominal high of $39.63 per ounce.
Oil settled at $108.34 per barrel, which pushed U.S. gasoline prices up to an average $3.685.
Cotton prices are around $2 per pound, which has many U.S. farmers scrambling to plant cotton this year instead of food crops such as corn, soybeans or peanuts.
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Goldman lifts commodity hopes – notably for crops
The investment bank edges higher its estimate for returns on commodities this year, with prospects for crops particularly improved
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Morning markets: sugar’s collapse puts crop markets on edge
Food commodity investors wait to see if sugar’s worst daily plunge in a decade will set a trend. At least the dollar and weather are on bulls’ side
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Copper prices hit historic high as investors push commodity prices up
London, Britain, United Kingdom (AHN) – Copper prices hit a 30-year record high on the London Metal Exchange Friday before falling back slightly.
The price of copper peaked at $9,631.75 per metric ton, driven by demand and tightening world supplies caused by the global economic recovery coupled with low stockpiles of the industrial metal. Copper prices have risen 41 percent this year with 15 percent of that increase coming in December alone.
Precious metals were also up; silver prices were up by 74 percent while gold prices were up by a more modest 28 percent.
However, metals weren’t the only commodities that saw price increases in 2010.
Along with the global economic recovery, the low value of the dollar fueled price hikes in commodities as cash-rich international investors looked for some place to invest their money at a good rate of return.
In 2010, international investors also drove up the prices of food and fuel with coffee up by 72 percent, sugar by 62 percent, corn by 38 percent and wheat by 26 percent. Oil rose 14 percent to more than $90 per barrel.
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Commodity Tips – When to Take Profits in Commodities.
When it comes to business of trading, taking profits in commodities is one of the more important aspects. In most of the times, it has been observed that new commodity traders are often conflicted with the emotions of fear and greed when it comes to taking profits. A successful commodity trader will ignore both emotions and use a more structured means of taking profits.
However, the commodity traders should know where they plan on taking profits on a trade and how much they plan on risking on a trade before the trade is even placed. This does not always mean a trader knows the exact prices on the risk and profit levels. A trader could have a set of rules where he or she plans to exit a trade. If certain conditions are met, the trader will take profits on a trade.
Moreover, some of the traders who are following trend will often let profits run until the market reverses. For example, a commodity trader could buy gold futures and hold on until the market breaks down below the 20 period moving averages. Once the market moves below the 20 period moving, the trader must exit the positions, whether it is a win, loss or draw. And some of the traders like to use a fixed dollar amount to take profits on all their trades. It is a very simple way to trade without trying to think too much about exit levels. Sometimes I will adjust these levels if volatility significant increases or decreases.
Taking profits at a major support or resistance level is one of the most logical types of exit to use. Support and resistance points eventually break, but the odds are that they will hold. Therefore, many commodity traders will take their profits before the market tests these levels.
The most important thing to realize about taking profits is that it is best to have a plan before the trades are placed. A lack of a profit objective will leave a trader with uncertainty and stress. This will often lead to poor decision making and constant second guessing. Finally, there are some well established and experienced stock market agents are providing these commodity tips and commodity trading tips and services to their clients. For more information and details, please do not hesitate to visit their valuable website.
Why Should You Trade in Commodity?
Commodity trading has immense opportunities for those who are interested in diversifying their investment portfolio. The returns are much quicker than any other investment trading, allowing you to earn quickly. Moreover it also gives the trader the choice to choose an online broker along with lower commissions so that their profits are large. However it is best to be well equipped before you begin commodity trading in any commodity. Knowledge will keep the investor wary of any kind of lurking danger in Commodity trading
Let’s understand the benefits of commodity trading markets.
Online commodity trading – Online trading in commodities is an excellent choice since the investor will find it to be one place where everything needed is found. With online trading software as soon as the trading account is logged into you will find information on future trades, technical analysis, quotes, charts as well as research that will help you make the right investment choice. This is one reason why traders are free to trade in the commodities of their choice, and make their own decisions when it comes to buying and selling. Traders now no longer have to do the hard work, but can still stay on top of the trade by making the final buying or selling and even selecting commodities to trade in.
Commission – Online Commodity trading is the best option or else you cold also get a broker who will manage your account. Executing the trade is instant and trading over the phone is only a waste of time. You will also enjoy low commissions when you decide to trade in commodities. Infact it is now possible to trade in less than $10 for a round turn though an online broker. This helps in making a very profitable trade that also includes day trading, short term trading and even spreads. With lower commission charges and high returns your profit margin is much higher as compared to forex or stock trading.
Leverage – Since commodity trading works on the margin system, in other words if you have to take a position in a trade you could choose to have only a fraction of the value that is available in cash present in your trading account. No uptick rule – Futures contracts which is also a type of commodity trading can be easily bought and sold. This allows the trader to make quick profits with the rise or fall in the markets, depending on what suits the investment.
How Are Prices Determined In The Commodity Markets?
A common understanding among most is that the prices of the commodities that are traded in the commodity trading market have their prices already predetermined with the help of the commodity trading exchange. This however is not true. What most of us would be surprised to learn is that the prices of these commodities are determined depending on the market conditions of demand and supply.
The reason why a commodity price increases is because the supply of the commodities is much lower than the actual demand. If the number of sellers for a particular product is much more then that the number of buyers then the prices of the commodity falls. The buying and selling of the commodity comes from various sources and all of this is then channelized to the trading floor so that it can be executed. This forms the basis of the price execution of the products in the commodity trading markets. The buying and selling orders are then converted to the actual sales and purchases in the commodity trading floor. The regulation then further states that the prices be further determined by the public outcry from a commodity trading pit or a ring and this does not include any kind of private negotiation to fix prices.
The prices of the commodities transaction are then recorded and this is then sent out to the number of people with the help of a huge telecommunication network system. If you want a clear picture of how the sales and purchases of commodities are made, the best visual picture would be the public auction that is action packed. It follows the same kind of principle; however it is not the same for the futures market where there is a two way auction that continuous to go on even after trading hours. This two way auction is because of the standard futures commodity trading contract which does not need any kind of description of what the sale has to offer.
In a two way commodity trading contract, the volumes of the goods that are bought and sold in the exchange floor are in a sufficient volume making it a much more practicable trade. However the public auction is where you will find a lot of emphasis on the sale of the product.
The commodity trading markets main purpose is to have an organized market place where members can buy and sell commodities that they are interested in freely.
Trading Commodities Can Make You a Fortune
There is no question that you can become wealthy trading commodities, or if you will, the futures market. I have traded nearly every possible commodity, including grains, metals, currencies, energies, and all the others. I have been quite successful. The key to this success is knowledge.
A great example of knowledge is understanding, and then implementing seasonal tendencies into your overall analysis. My experience tells me that commodities follow a seasonal trend. This is an essential tool to help you forecast price movements. You need to make an analysis of the commodity you are interested in. Is it following a normal seasonal price pattern? Once you establish this, you have a major clue to work with. As an example, soybeans tend to make a seasonal low in October. Watch for a trend reversal around that time. Seasonal tendencies work best in the grains market. This is only one example of the knowledge required to build a solid foundation to achieve success, trading the commodities market.
Amazingly, over 90% of all commodity traders ultimately lose. This means that 5-10% are making most of the money. Why does this happen? How does one get into this elite trading group that makes fortunes? Let us examine a few of the answers to these questions.
A major reason many people lose money trading any market, is because they tend to follow the advice or opinions of someone, who in reality, does not have a clue, when it comes to successful trading. You need to implement a proven trading plan, and do your own research and analysis.
Normal human nature tends to be detrimental for most people who venture into the trading business. Many times you must do the opposite of normal human nature, to be successful trading the markets. The golden rule of, cutting your losses short, and letting your profits run, goes directly against normal human nature. Successful trading requires you to eliminate emotions, such as greed, fear, and hope, from your overall trading process. Never underestimate the importance of psychology when it comes to trading or investing.
What I have talked about in this article is only the tip of the iceberg. A successful trading education is a long process to say the least. It requires learning the proper strategies, methods, and principles. Becoming a trading master also means, you must understand, and then implement, proper trading psychology. Fortunes are made trading the commodities market. You will need to put the time and effort in, to achieve great success.
About Author Hi, I’m Gary E Kerkow, founder of Tradingmarkets4u.com. This site provides information to help traders and investors become successful. I have over 20 years of trading experience including stocks, futures and options. Visit my website at http://www.tradingmarkets4u.com
Commodity Trading is a Great Business
There are many reasons why trading the commodities market is a really good business to be in. You do not need a lot of money to get started, and the potential you can make is virtually unlimited. I would say 2 or 3 thousand dollars is an okay amount of trading capital to begin with. I do think it is better to start with maybe $5000 or so. One thing is for certain. If you can not make a profit with a few thousand in your trading account, you will not make money, no matter how much money you start with.
A great benefit of being in this business, is the fact you are your own boss. You can set your own hours. You make all your own decisions. You can live pretty much anywhere you want, and still be in the business of commodity trading. Basically, you set all your own rules. How nice is that !!!
A really cool part of this business is you can trade commodities, such as corn and soybeans in the grains market. You can trade silver and gold in the metals market. You can trade a wide variety of commodities from currencies to cocoa. As you can see, there are quite a few different and interesting markets you can trade in.
An amazing feature of this business ,is the amount of great leverage you get with commodity trading. As an example, one futures contract of corn controls 50,000 bushels of corn. Each one cent move in the market is worth $50. This can be a double edged sword. You can make an incredible amount of money in a short period of time, but the reverse is also true. That is why you must implement sound money management to be successful in the world of commodity trading.
I am not saying, in any way, shape, or form, that commodity trading is easy. Actually, it is very difficult to successfully trade commodities. Commodity trading is the major league of all trading markets. If you put in the time, and effort, to learn the proper strategies, methods, and principles, you can make a fortune in a relatively short period of time. About 5-10% of all commodity traders make most of the money. If you can get into this elite group, you will certainly become very wealthy.
About Author Hi, I’m Gary E Kerkow, founder of Tradingmarkets4u.com. This site provides information to help traders and investors become successful. I have over 20 years of trading experience including stocks, futures and options. Visit my website at http://www.tradingmarkets4u.com
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