Corn Is King, but Crude Is Czar

January 19, 2011 07:29 PM
 

Corn may be king, but crude oil is czar of the universe, says William Lapp, former chief economist for ConAgra Foods and current president of Advanced Economic Solutions LLC in Omaha, Neb. As crude oil prices go, so go the prices of commodities.

“Crude oil has a huge influence on all commodities, including agricultural commodities, and we can’t overlook that,” Lapp says.
 
Crude oil is likely to trend higher in the early months of 2011, based on the outlook for commodity demand, particularly from developing economies.
 
“Developing economies have more commodity demands than the rest of the world and want more goods and services,” Lapp says.
 
China alone represents 40% of the cumulative growth in crude oil demand since 2000. Another 8% of crude oil demand comes from other developing countries. OECD countries, including the U.S., Japan, parts of Europe, Australia and Canada, have seen a decline in demand.
 
Lapp says crude oil prices pushed up to $147 in 2008, then backed down to $32 in March 2009, at the height of the recession. While prices hover in the $72 to $88 range currently, he expects them to trend higher in 2011.

 

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