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Current Marketing Thoughts

RSS By: Kevin Van Trump, AgWeb.com

Kevin Van Trump has over 20 years of experience in the grain and livestock industry.

Why China Continues To Dictate Price Direction

Dec 18, 2010

I continue to talk about China and in particular China's demand, and why I believe it will dictate commodity price direction for the next 10-20 years.  I wanted to make sure all of my readers understand why I feel this way.  I think everyone will agree with the fact that China is on track to become the biggest demand market in the world for commodities of all types, especially agricultural commodities. Currently China has a population of 1.3 billion people and growing rapidly. In the past, most of these individuals lived in rural isolated areas and had little or no income. That trend is changing, and changing rather quickly. As of today it is being reported that China’s middle class population is now larger than that of the United States.  To paint a better picture, think about it this way: Here in the US 33% of our entire population are considered "middle class", that is roughly 106 million Americans. In China, only around 13% of their population is currently considered middle class, but with a population of 1.3 bln that equates to over 175 million Chinese. Reports are being released from many world economic leaders that think China's middle class could total more than 700 million people within the next 10 years. Another way to look at is like this. Italy currently has 575 cars for every 1,000 people, Germany has  505 cars for every 1,000 people, the US has 470 cars for every 1,000 people, China currently has only 50 cars per 1,000 people. I hope this helps you see the explosive potential that China poses.  As they have taken the lead in global manufacturing their population is moving to Urban areas by the thousands in an effort to earn higher wages and improve their current lifestyle. With this will come the desire for a higher protein diet (eating more beef, pork and poultry), the demand for more feed grain, fuel, energy, housing, will obviously follow...Bottom line, the demand will be unstoppable.  We will eventually see prices move to entirely new levels. Unfortunately I can not tell you the exact date or time, but I have a feeling you are just starting to witness the initial surge.

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