The crush of demand for pork has made the supply vulnerable to all sorts of fluctuations, from epidemics of pig diseases to weather changes that affect the price of grain that fattens pigs. But a nation that runs on pork cannot afford to run short. So in 2007, the government decided to establish a national pork reserve, reasoning that a backlog of frozen meat could be used to make up for shortages and stabilize prices when necessary.

This is following Wednesday’s announcement of a major investment in large-scale pig farms this year as the central government attempts to moderate long-term prices. From Xinhua News Agency:

The Consumer Price Index (CPI), the main gauge of inflation, jumped to 6.4 percent in June, the highest level since June 2008 and well above the government’s target of 4 percent for this year. The price of pork has become a major driver for rising consumer prices.

“Stabilizing prices remains the top priority for our macro-regulatory policies,” Premier Wen Jiabao said early this week.

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Post tags: commodities, inflation, pork prices, pork reserves
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“I was recently in Shanghai and I took their high-speed train to Hangzhou,” he said, referring to the new Maglev line that has cut traveling time between the two cities to less than an hour from four hours previously.

“The brand new high-speed train is half-empty and the brand new station is three-quarters empty. Parallel to that train line, there is a also a new highway that looked three-quarters empty. Next to the train station is also the new local airport of Shanghai and you can fly to Hangzhou,” he said.

“There is no rationale for a country at that level of economic development to have not just duplication but triplication of those infrastructure projects.”

Still, some believe that the American economy may benefit from a global slowdown. From the Atlantic:

“For example, that same global demand contraction that may cut U.S. exports would drive down the prices of many commodities, like oil. Rising food and gasoline prices are arguably the chief obstacle for the U.S. economy at this time. Consumers and businesses have both cut their spending in response. If those prices begin to decline, then the U.S. recovery could get back on track.

Moreover, more aggressive investment in the U.S. could extend beyond just Treasuries. U.S. corporations could benefit if investors looking for a higher return than Treasuries provide turn away from equities in developing nations for a time and move to U.S. stocks. Of course, U.S. corporate debt will also look more attractive than bonds from firms in other nations with worse economic situations.”

Evidence of sliding commodity prices were noticeable at the end of today’s trading. From the Washington Post:

“Silver and copper fell on the latest sign of a slowdown in China’s economy. Both metals are used in manufacturing, and investors are concerned that a slowdown in China could cut into demand.”

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Post tags: commodities, economic slowdown, Nouriel Roubini, recession
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I don’t mind if China has civil war, epidemics, panics, depressions, all of that. You can recover from that. The only thing you cannot recover from is water … China has a horrible water problem in the north. India has a worse water problem, there’s no question about that; America, in some places, has water problems. If China doesn’t solve its water problems then there’s no China story … I’ve been around the world a couple of times, I’ve seen whole societies, cities, countries that disappeared when the water disappeared.

They’re spending hundreds of billions of dollars … they’re spending staggering amounts of money trying to solve their water problem. I am presuming that they will. Now, maybe they won’t, and if they won’t, in twenty or thirty or forty years, the whole story’s over.

He acknowledges other looming problems such as demographics. “But I don’t see any other country on the horizon which will be the most important country in the 21st Century. It’s not going to be the UK. It’s not going to be the US. It’s not going to be Denmark.”

Rogers also discusses rising oil prices, America’s economic fate, and the Asia-centric education he has chosen for his children.

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Post tags: BBC, commodities, investment, Jim Rogers, speculator, United States, water crisis
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Australia’s minority government will hand down its first budget next Tuesday, with revenues hit by natural disasters and a high Australian dollar and little room to spend on populist policies to buy back falling support.

What revenues it does have to spend are heavily dependent on China’s insatiable demand for its natural resources ….

Though the economy is in its 20th year of expansion and with a booming resource sector and huge Chinese demand, Treasurer Wayne Swan has promised a tough budget, with a tight rein on spending to ease mounting inflationary pressures and achieve a promised 2012-13 surplus.

Australia’s deficit and debt is small by international comparisons, but its political parties are obsessed with achieving and maintaining a surplus, aware that voters see failure to do so as economic mismanagement.

Australia was the only advanced nation to avoid recession during the global financial crisis, thanks in large part to exports of resources to China ….

“The budget comes with a ‘made in China’ stamp these days,” said Deloitte Access economist Chris Richardson. “If China, and hence commodity prices, stumble, then the budget will take a battering.”

Prime Minister Julia Gillard visited China last month. The Sydney Morning Herald summed up her “dance with the dragon”:

It could have got a bit nasty, given the pressures on Julia Gillard to put her stamp on foreign policy and her inexperience in the field, but the Prime Minister’s visit to Beijing has shown both sides determined to make the best of the fast-expanding relationship between Australia and China.

Gillard has essentially returned Canberra’s handling of the relationship to the patient, pragmatic and optimistic approach that her predecessors have found to be the best, ending the prickly tone in some of the messages of the former prime minister Kevin Rudd. With China becoming Australia’s biggest trade partner two years ago and now taking 25 per cent of our exports, and Australia a crucial source of raw material and energy supply for China, there is every reason to look to the positives and work towards averting negative developments.

On the economic side, there seem few concerns that cannot be worked through. The sudden rush of Chinese investment bids after the 2008 global financial crisis rang alarm bells here, and caused a scramble to refine foreign investment policy in Canberra, particularly about government-controlled corporations and cornering strategic commodities. The strong turnout from China’s biggest corporations and its sovereign investment fund for Gillard, and its professed interest in building infrastructure, suggest Australia is still seen as hospitable.

Australia’s exports to China may soon include kangaroo meat; so far, the prospect appears to have largely avoided controversy like that surrounding Canada’s “imperialistic” foisting of seal meat onto the Chinese market.

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Post tags: Australia, Australian relations, coal, commodities, imports, iron ore, raw materials market
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Today, the world is dancing to a new song with a potentially devastating ending, says Vikram Mansharamani, an equity investor, Yale lecturer, and author of the book Boombustology. That song is called “Commodities.”

“I’m a China bear,” Mansharamani says. “China is exhibiting all the signs you would expect from an unsustainable boom.” He first points to the housing market, where investment hit the inauspicious market of 6% of GDP — the same mark the U.S. hit in 2006 as the bubble was bursting. What’s more, outstanding loans for developers and residential mortgages in China have increased by a factor of FIVE in the last decade. Loan balances have nearly doubled in the last three years alone.

Even worse, Mansharamani says, the Chinese government has spent lavishly to create demand that never materialized. He points to ghost towns like Qungbashi, in Inner Mongolia, a city designed for 1.5 million residents, but drew only 20,000 — hardly one percent. He points to the New South China Mall, not far from Guangzhou, which was built to handle 1,500 tenants. Instead, it houses a few dozen — hardly one percent. This sort of one-percent success rate creates ludicrous overcapacity that is eerily reminiscent of the empty homes and strip malls lining recession ghost exurbs in Arizona and Nevada. Mansharamani sees it as the prelude to a dramatic slowdown in government spending on buildings and infrastructure.

But as China goes, commodities go. China’s share of world demand for leading metals like aluminium, copper, zinc, lead, nickel, and crude steel is about 40 percent, according to research obtained from Goldman Sachs. For steel, China commands nearly half the global market. (In 2000, its share of global demand for those metals was between 6 and 16%.)

If China slows down even to 5% growth a year, that will take a booming commodities market down with it.

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Post tags: commodities, economic growth, economic slowdown
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Strong buying by China has helped lift commodity prices around the world this spring, but growing evidence suggests that a sizable portion of this buying has been to build stockpiles in China, and may not be sustainable.

Commodities and shipping executives describe Chinese stockpiling in recent months of a range of other commodities as well, including aluminum, copper, nickel, tin, zinc, canola and soybeans. Starting in April, China began stockpiling significant quantities of crude oil.

China’s goals vary by commodity. Chinese companies have bought iron ore heavily on the spot market in anticipation of higher prices in annual contract talks now nearing completion. The Chinese government has been stockpiling oil and some metals for strategic reasons, and bought huge quantities of aluminum and canola to insulate domestic producers of these goods from falling global prices over the winter.

Those extra purchases beyond China’s daily needs have helped reverse the price collapse in commodities that followed the economic downturn, but could also limit the scale of the rebound.

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Post tags: commodities, financial crisis 2008-2009, stockpiling
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China’s growth rate may be slowing in concert with the world economy, but even at that slower rate, its economy continues to expand, requiring a steady increase in supplies of oil, copper, aluminum and other minerals. And laying in sources of supply for those commodities also helps it prepare for the next boom. As economies across the world shrink, Chinese officials have told reporters in Beijing in recent weeks that they see a rare chance to expand its sources for primary commodities. “There are editorials in the Chinese press saying that this is a one-in-one hundred-year’s opportunity,” says Erika Downs, China energy fellow at the Brookings Institution in Washington. “There is a sense that this is a moment to be seized, that with competition lower they can get a good deal.”

Recent deals with Brazil and China highlight Beijing’s ability to use loans a means of securing energy supplies. In mid-February, Beijing negotiated a $10-billion loan to Brazil’s state-owned oil company Perobras, as well as a $25-billion loan to Russia’s state-run oil company Rosneft. Both companies’ revenues have plummeted in recent months as crude oil prices fell by more than two-thirds. China offered large cash amounts in a tight credit market, but rather than require that the loans be serviced and repaid in cash, Brazil and Russia will repay the loans in crude oil supplies to China over the next two decades. Russia will ship eastern Siberian oil, while in Brazil, China hopes to get a share of major offshore fields which have recently been discovered. So, no matter what happens to the global economy, China is assured steady oil supplies over the next 20 years from two major oil-producing countries, in regions which are far more politically stable than China’s suppliers in Africa.

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Post tags: commodities, financial crisis 2008-2009, spending
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China is snapping up resources at an unprecedented rate, driving world commodity prices through the roof. But more alarming is the scenario 25 years down the line, when China’s per capita income could cross that of the US, writes Jim Lobe. If these increased incomes translate into the kind of lifestyle currently enjoyed by many US citizens, Chinese demand will wring the planet dry of its resources.

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Post tags: commodities, natural resources
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