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Strategies & Market Trends : Commodities - The Coming Bull Market -- Ignore unavailable to you. Want to Upgrade?

To: craig crawford who wrote (563)	7/22/2001 5:05:54 AM
From: craig crawford	Read Replies (1) \| Respond to of 1643

DEFLATED BY COMMODITIES APRIL 1999 Industry can do more with less, so commodity producers must do more for less As commodity prices hit historic lows, a cyclical pattern gives way to a vicious circle worldpaper.com George Palmer reporting from LOS ANGELES A chill wind has been blowing through the world's commodities markets. Nearly every commodity, from oil to oranges and from coffee to copper, is being sold for rock-bottom prices. This wind has bowled over raw materials producers and impoverished struggling export nations. But, as they say, it's an ill-wind that doesn't blow someone some good, and this one has brought good times for consumers. The declining cost of a wide range of basic materials has helped the advanced industrial economies to put a lid on production costs and hold down retail prices. Cheaper inputs have heralded one of the longest periods of non-inflationary growth in recent history. Is it an unfair trade-off? Possibly. A case of the rich getting richer and the poor getting poorer? Certainly. The blessings of abundance are not necessarily distributed evenly. To those that hath it shall be given. To those that hath not, it shall be taken away. .............................................................................................................................. But how to explain why commodity prices continue to be so depressed? We have to go back to good old demand and supply. Quite simply, rising production has not been accompanied by a proportionate expansion of demand. And falling prices have not cut back supply. Behind that somewhat simplistic observation lie some fundamental changes. First of all, the previous peak in the raw materials price cycle during 1993-1995 encouraged farmers to plant more, miners to extract more and smelters to invest more. Relatively benign weather patterns also led to higher crop yields. The surge in deliveries to market was not only a response to buoyant prices. Over the years new and improved technologies-from agriculture to oil exploration-have been developed and are now being applied. Farm output benefited from better seeds, some genetically-engineered. Oil output surged, helped by greater recovery due to horizontal drilling. Enhanced geological modeling also made locating oil reserves easier and cheaper, as did 3-D computer seismology and deep-water technology. Improved leaching and solvent extraction had lowered production costs for miners.