This Demand Is Real

January 28, 2011 08:24 PM
This Demand Is Real
America was caught sleeping when it comes to the current world demand for commodity prices. It just didn’t happen in one night of sleep, however, said Jerry Gulke, president of the Gulke.

Gulke Group Inc.

Speaking at the 2011 Top Producer Seminar, Gulke pointed out that for nearly two decades, the United States has granted China most favored nation trading status, allowing them to build up their supplies and standard of living. Meanwhile, the U.S. was busy ignoring its own food needs.
“We have no strategic reserves ourselves and China was building a demand base with a population that has as many people in the middle class as we do in the entire population. That isn’t going to go away anytime soon. Now we have food inflation and we see an explosion in prices. We may think on the surface this may be a shot in the dark, but we have to be careful not to underestimate how big this demand is too.”
We have to understand how the costs of raw materials cycles through. We pay maybe 12% of our income for food. In China it’s 48%. If you raise the price of food over there, now they have no money left to do anything else.
Now there is civil unrest in the Middle East that developed late this week that will further spread market volatility. Rumors Friday morning at the Chicago Board of Trade spread that Lloyds of London would no longer insure ships traversing the Suez Canal. This will particularly impact the wheat market, if true, in the coming day.

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Spell Check

1/29/2011 04:15 AM

  I am sorry, but this article misses the mark. The run up in commodity prices worldwide is almost entirely driven by corn ethanol. When you take 40 percent of all the corn and light it on fire - well guess what the price goes up and people plant more of it at the expense of other crops. If we just stop making ethanol from corn this entire problem could be solved. Oh, but then what would we use to "buy off" farm state votes?

1/29/2011 05:40 AM

  Since grain has been priced cheap enough to burn for the past 60 years, why should the farmer continue to be the only ones that must produce for less than the cost of production? Ours would still be the greatest nation on Earth if we hadn't sold out our agriculture at fire sale prices for so long. And now that we finally wake up and use a small percentage of our surplus for fuel, who's brilliant idea was it to let the oil companies set the price of ethanol blended fuel? Of course ethanol is not going to sell if it is priced only a couple of pennies less than non- blended fuel. And E-85 needs to cost a couple of dollars less than regular. It would suddenly become the only fuel anyone would buy. Let's let the farmers set the price of ethanol blended fuel - after all they have a long, long history of selling for less than the cost of production while the oil companies have never sold anything for less than a vast profit.

1/29/2011 05:45 AM

  They shouldn't let people who don't understand Econmics, talk about Econmics. Gary from IN let me explain something to you. If you take away ethanol, then you lose thousands of jobs, that's not good. What do you think the price of gasoline would be if oil didn't have ethanol to compete with ($4-5 a gallon), and when you use ethanol you still feed the byproduct. So it's not like your taking all that corn away from the market. Ethanol has made strides of efficiency in the last 10 years and they will make more and be even more efficient in the furture. If your going to cry about something, talk about the farm payments farmers receive to farm, that is a payment the government should be keeping and not spending else where, but keeping it and putting it towards our national debt. We should flip it, fine farmers that don't farm the right way, instead of paying them to do the right thing. Don't bang on agriculture , they are the ones paying for this country right now through income and property taxes. Let me tell you something about the future, China's buying cars like they are gold and cars take a lot of gasoline and that is going to make oil go way up. And if you don't have ethanol to compete with oil base gasoline then oil will be $200 a barrel. Trust me you won't like that, lots of products are oil base. Do you really want to do business with the middle east (look at the type of people in Egypt right now) or American's that pay taxes in this country and are good Christian people!


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