Global Commodity Markets ? Old Patterns & New Realities

For the past two years, there has been a high degree of speculation about the impending end of the commodity super cycle and its implications on the global economy. This whitepaper seeks to analyze the possibilities of the super cycle ending and its potential impact. Historically, the global commodity market has followed a particular trend called the super cycle, where prices on average decrease for two decades and then subsequently witness an increase for the next one decade. This pattern holds true for almost the past 100 years. We have witnessed a dramatic rise in commodity prices since the start of the last decade, and industry analysts are currently anticipating the beginning of a decline in commodity prices for the next two decades or a new super cycle. However, this time it is doubtful whether this historic pattern would hold good as commodities just do not feed industrial demand anymore, as they have done historically; these days commodities are a market increasingly driven by investment demand and speculation as a result of investor sentiment. Under these conditions, itï¾Ãƒâ€šÃ‚Æ’??s important to analyze the impact of a sustained drop in commodity prices and whether the decline in prices would actually take place. From a procurement standpoint, it is recommended to conduct buying activity of key commodities on a hand-to-mouth basis until more clarity emerges on Chinaï¾Ãƒâ€šÃ‚Æ’??s actual economic growth in 2012, which would effectively decide the course of commodity prices during the next year and thereby the course of the current super cycle.