There is a new fact of life that we have to deal with in the U.S. and Canada. That new reality is high world commodity prices. These are having a tremendous impact on costs and pricing, resource investment and currency values.
It is stating the obvious that a commodity’s price depends on demand and supply. However, this relationship is no longer as simple as it once seemed to be. There are a lot more players now and a lot more factors to take into account.
For example, on the demand side, the emergence of the BRIC nations – Brazil, Russia, India and China – has greatly expanded the size of the market. On the supply side, availability is a function of developed sites (or arable land, in the case of agriculture), planned capital spending, geopolitics in some unstable nations, the weather and avoiding bad luck (e.g., mine floods).
Furthermore, all of these factors are interlinked. Influences on upstream production find their way downstream, often quickly, but sometimes with a delayed effect. Keeping track of what is going on, across many countries and under a wide variety of circumstances, has become an extremely complicated and difficult process. I would liken it to playing some futuristic version of the game of chess in three dimensions.
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