The Commodities Boom

The Commodities Boom

The Commodities Boom during the 2000’s is a rise in many of the physical commodity prices. Physical commodities are good such as; food (corn, wheat, rice, cocoa, soybean), paper (recycled paper), fuel (coal, oil, uranium), precious metals (gold, silver, platinum), and other metals (aluminum, nickel, copper, lead, zinc), chemicals (sulphuric acid), and non metals (chlorine). This boom follows the commodities depression of the 1980’s and 1990’s. The commodities boom occurred mostly from the sliding dollar, recovering economies and rising demand from emerging markets such as Brazil, China, Russia and India. (Dicker, 2010) The commodities boom was created following the collapse of the housing bubble in the mid 2000’s. Commodities were seen as a safe investment and various countries, especially the emerging ones, began to use these goods that helped begin the rise in prices.

Basic food stock prices began to rise due to rising global population and because of a decline in a production of food crops. Ethiopia saw a drought in 2007 and cocoa had bad crops outcome in 2008. A percentage of crops that were usually made for consumption were now given toward the manufacturing of bio-fuels. The prices in wheat, corn and soybeans rose significantly during 2006-2008: 136%, 125%, and 107% respectively. (Steinberg, 2008) At its lowest point wheat was $15 per unit and rose to $127 per unit in 2010. In April 2008 national bread prices rose which led to food riots in Egypt. (Black, 2008)

Coal demand became high in countries like China, India and in other Asian countries. They are using coal in their energy industry. Even in the Unites States, coal is in new demand due to new coal-fired plants, which are coming to the market. (Coal, 2009) Coal prices rose from a low of $76 per unit in 2009 to a 2010 high of $119 per unit.

Crude oil is the most widely used energy material in the world. It is a mixture of hydrocarbons that exists in a...