LOUSIVILLE, Ky. — Globalization is pushing demand in the commodities market.<br>

Bob Utterback, economist and president and CEO of Utterback Marketing Services, Inc. of New Richmond, Ind., told farmers last week at the 43rd National Farm Machinery Show in Louisville that he expects continuing global economic growth to keep fueling demand in the commodities market.<br>

Utterback said population increases and a developing middle class in Brazil, China, India, Indonesia and Russia are changing the dynamics of the marketplace.<br>

“The result is we have more demand for food, fuel and fertilizer,” he said. “The demand in energy is being accelerated by the Asian market. With India and China’s growth rate, the energy demand continues to increase.”<br>

In China, experts predict the number of vehicles sold annually soon will surpass the amount sold in the United States, and largely alternative fuels – especially biodiesel – will fuel those vehicles. That demand, coupled with predictions that the world’s supply of crude oil is going to peak in the next 10-15 years, is fueling Utterback’s expectation that corn and soybean markets will continue to gain strength.<br>

“I think energy is the No. 1 national issue,” he said.<br>

“If you don’t have a cheap energy source, you don’t have a strong manufacturing base. If you don’t have a strong manufacturing base, you don’t have jobs. If you don’t have jobs, you can’t pay for food.”<br>

All of these pressures are feeding a growing demand from investors to invest in commodities.<br>

“We’re seeing more money wanting to invest in the commodity markets,” Utterback said. “We’re seeing a shift from ethanol. Now they’re moving into potash and fertilizer.”<br>

With additional energy demand overseas, there is a great incentive to expand production. Utterback said the cheap U.S. dollar is hurting agriculture by causing fertilizer costs to go up due to importing of inputs overseas.<br>

“Crop nutrient prices are all at record levels,” he said. “This is where our biggest weakness lies. Asia is growing immensely in the million of tons of fertilizer input. There has been a tremendous explosion of consumption of fertilizers on a global basis. This is driving a potential supply crunch and current increases in prices. Let’s face it, (the market) has never been here before.”<br>

New dynamics also are playing into the mix, with uncertainty about how much acreage will be pulled out of small grain, hay and specialty crops production this year, and whether land will be released from the Conservation Reserve Program and put back into production. Utterback urged farmers to consider all of these influences, coupled with concerns over weather, when forward-contracting commodities.<br>

“I think the odds of a dry weather event are less than 25 percent, but if it does happen, it’s going to be very detrimental,” he said.
Utterback also reminded the group that while the global demand for alternative energy largely continues to fuel the market, there still is a demand for domestic feed sources that isn’t going to go away.<br>

Livestock producers are reeling from increased costs due to record corn, soybean and wheat prices. In some areas, hog prices have dropped to 8 cents per pound. “If we kill (these markets) long-term, we’re going to pay for it,” he said.