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Look at the commodities prices today. Natural rubber is at historic high thanks to heavy rains that have badly hit tapping in major producing countries like Thailand, India, Malaysia and Sri Lanka. Pepper prices have nearly doubled in the last one year thanks to the acute shortage of the spice—because of low production—in several pepper growing countries.
There have been acute production shortages in major food commodities like rice, wheat, corn etc. Prices of most agricultural commodities have just zoomed or doubled in the last one year.
It is not just the agricultural commodities. Take the case of metal commodities. Price of gold, silver, copper, zinc, aluminium etc have all skyrocketed in the last one year thanks to low output and rising demand. The result is that investors who have piled their money into commodities have earned rich dividends.
Commodities specialist Ben Mathias says commodities are in a boom cycle that will continue for some years. “There are several reasons why commodity prices are booming. First and foremost is that production of several crops and metals commodities are going down while consumption of these is going up. So there is a serious demand supply imbalance, which is creating the price rise,” Mathias said.
According to him, commodity market is in a bubble because price shocks coming from various quarters affect commodities globally.
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