Thursday, August 14, 2008

India, China to drive commodity prices: Jim Rogers

Not too sure when was this article published. Putting it here just for the record:

Commodity Online

MUMBAI: World’s leading commodity investment expert Jim Rogers says India and China will drive the commodity prices though global stock markets have been hit by the subprime and credit crunch crisis.

The credit crunch brought about by the problems in the American subprime mortgage market has hit the prices of oil and industrial and precious metals, like copper, nickel and gold.

But Rogers says fear of a possible global meltdown will not affect agriculture/commodities market.

“There is basically only one safe haven left: the agricultural market, also called the soft commodities,” Rogers, who is called the world’s most famous ‘commodity guru.’

According to him, commodities like wheat, corn, soybeans, cocoa and sugar will not be hit by the subprime market problems.

“Buying futures on these individual products enables people to partly hedge their 'shopping' against inflation,” he pointed out.

He said the increasing prosperity in China and India for instance is one of the driving forces of agricultural prices. “Even if the United States of America was to go bankrupt, another three billion people from China and India would still drive the demand for food,” Rogers said.

This is also one of the reasons why soft commodities are less vulnerable to the current problems than other investments. Not only have hedge funds and, to a certain extent, some investment banks, like the German IKB and the French BNP Paribas, been forced to bail out, but also speculative positions in the oil and metal market, he said.

Rogers said there is another important factor that is putting pressure on agricultural products: the increasing demand for biofuels.

“Sugar (cane) can profit from this development, since sugar is the primary commodity for ethanol. Nowadays, the relative value of sugar in comparison to oil, because of the year to date drop of nearly 20 per cent, is very low,” the investment expert remarked.

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