World Economic Growth Will Push Commodities Higher

World Economic Growth Will Push Commodities Higher

 

It's surprising but true-HPCL, BPCL and IOC are picking Equity in the Louis Dreyfus Ethanol Manufacturing Units in Brazil, but find reasons not to Buy India produced Ethanol

 

The Rapid Growth of
Trade Between Asia
And Emerging Markets

 

Not too long ago, global trade deals of substance that did not include the United States, Western Europe or Japan were rarer than hen's teeth.

Today, it's precisely the opposite. When you read the headlines about major deals, it often seems as if the world's industrial giants don't even exist. Here are just a few examples from this year alone ...

• China's largest steel producer, Baosteel, has agreed to pay Brazil's giant mining company, Companhia Vale do Rio Doce, 65% more for its iron ore.
• Three state-owned oil marketing companies in India have announced they will jointly pump $600 million into Brazil to buy or lease sugar cane plantations and related units for producing ethanol. Bharat Petroleum, Hindustan Petroleum and IndianOil will acquire a 15% to 35% stake in two of the largest Brazilian integrated ethanol players -- Louis Dreyfus Commodities Bioenergia and Infinity -- plus a 50% equity in new plantations projects of a smaller firm, Rezek.
• China Petrochemical Corporation (Sinopec Group) has signed an engineering, procurement and construction contract with Brazil's state-owned oil company Petrobras to build 974-kilometer natural gas pipelines, its largest overseas petroleum engineering project to date.
• Venezuela's state oil company PDVSA is redirecting crude shipments from the Chalmette refinery in Louisiana to Chinese oil company Petrochina. Meanwhile, Venezuela is going to build three oil refineries in China to process its heavy oil.
• Indian Prime Minister Manmohan Singh and China's Premier Wen Jiabao have upped their 2010 target for bilateral trade between the two countries from $40 billion to $60 billion -- a move which they expect will greatly boost demand for oil, copper, iron ore, soybeans and other raw materials from Brazil, Argentina, Chile, Peru and Venezuela. Just the trade between Brazil and India alone is expected to growth three-fold by 2010.

Overall, Goldman Sachs now estimates that the four BRIC countries (Brazil, Russia, India and China) will be the largest drivers of the entire world economy by 2050. That means their combined economies could be bigger than those of the United States, Western Europe and Japan.

 

Unbelievable? That's what I thought 40 years ago, when demographers predicted that cities like São Paulo and Mexico City would be larger than New York or London by the end of the 20th century. They were right. And now those populations are on their way to catching up with ours in terms of buying power.

 

Nonstop Growth in Worldwide
Demand for Commodities --
Especially Food and Energy!

 

The new, burgeoning middle classes in Brazil and around the world -- plus the booming bilateral trade between Asia and developing nations -- are two critical pieces in the same puzzle: Surging commodity prices.

 

Look. These are not seasonal factors. Nor are they driven by politics, speculation or one-time disasters.

 

 

Consider global energy markets. Some still hope that alternate sources will sooner or later begin to catch up with soaring demand. But it's too little, too late. And in one sector -- corn-based ethanol -- the "solution" for energy supplies has merely created more scarcity in food supplies.

 

Or look at global food prices. Just in the last 36 months, the cumulative inflation is a whopping 83%. And demand continues to grow so quickly that many major nations have virtually given up the idea of building emergency stockpiles.

 

On six continents, famers and agronomists have made herculean efforts to expand acreage under cultivation, improve yields and boost production. And they've actually been quite successful.

 

But it's still not enough. In the most recent year-to-year comparison ...

• Farmers worldwide managed to boost production by 13.8 million tons. But stockpiles still plunged by 12.4 million tons.
• Corn producers harvested a whopping 66.9 million additional tons. But stockpiles still fell by 5.3 million tons.
• Soybean stockpiles fell even more dramatically -- down 14 million tons, or 22%, the largest percentage decline among all major grains.

The key reasons for soaring prices and sinking stockpiles? According to leading economists and the world press, they're precisely the same reasons that Larry began writing you about long before they were recognized by leading economists or the world press.

 

According to the Brazillian Folha de São Paulo, "the enrichment and diet changes in countries like China, India and Brazil. As their incomes grow, these massive populations can afford more proteins (such as meats), which, in turn, require more carbohydrates to produce (such as grains)."

 

It's because of "the crisis of confidence in major global stock markets leading many investors to shift to commodities, driving prices sharply higher."