Agricultural Commodities Face 'Explosive' Future on Demand, Prestbo Says

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19 Nov 2010

Agricultural commodities face an “explosive” future as increased demand and the effects of global warming exacerbate supply disruptions, according to John Prestbo of Dow Jones Indexes. Agriculture, or soft, commodity prices will become more subject to growing consumption in developing economies and increased incidents of bad weather damaging crops, Prestbo, executive director and editor of News Corp.’s Dow Jones Indexes, said in an interview in London yesterday.
“With the global increase in population and there not being extensive new farmland available to plant, soft commodities are going to become more vulnerable to the kinds of weather and other setbacks,” Prestbo said. “If you combine that with some scientists’ predictions that global warming is going to make storms either more frequent or severe, and shift patterns of rainfall and drought, then you’ve got an explosive combination.”
Increasing wealth in Brazil, India and China is boosting demand for grains, dairy products, meat and cooking oils. The Dow Jones-UBS Commodity Index of 19 raw materials has gained 2.8 percent this year, with cotton, sugar and wheat rising as floods in Canada, Pakistan and China and drought in Russia and across Europe killed crops. The economies of China and India, the biggest consumers of raw materials such as cooking oils and sugar, are growing at three times the speed of the U.S.
Commodity assets tracking the Dow Jones-UBS commodity indexes are an estimated $60 billion, according to Prestbo.

Source: Bloomberg