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These are tough times for commodities. Oil is grabbing
all the headlines, with prices plunging 50% since June
of last year. But agriculture prices are also soft,
especially corn, which is down 53%. Metal prices have
been weak for a while, particularly iron ore and
copper, which are 40% lower than where they were
two years ago. So is this the end of the commodity
supercycle? And, what does that mean for business?
A commodity supercycle is a period of unusually
strong industrial and urban development, where
demand for natural resources outstrips supply,
sustaining decades of high prices. Think of post World
War II or the industrialization of the United States.
There is strong evidence that we’ve been riding a
commodity supercycle. From the late 1990s to 2008,
almost all commodities were experiencing real price
growth rates exceeding 10% per year. Oil prices rose
1,062%, copper prices soared by 487% and corn prices
were up 240%1. The real price of food increased almost
80% to reach the highest levels in history. Commodity
prices crashed during the great recession of 2009 but
they recovered quickly and kept on climbing.
Why the soaring demand for commodities? During
this time period, there was an explosion in the size of
the middle class. According to the World Bank, the
emerging market middle class (people earning
between $2 and $13 per day) rose from 894 million in
1992 to 2.06 billion in 2005. It’s an incredible story:
more people were lifted out of poverty than at any
time in human history. And the first things people
want when they join the middle class are pretty simple:
better food, a nice home with a refrigerator and maybe
even a vehicle.
Look at the
adjacent graph of
car sales in China. Quite amazing,
but if we graphed
car sales in
South Africa or
in India, the
graphs would all look similar. All this requires
enormous natural resources. For decades, producers of
energy, metals and agriculture struggled because they
could barely keep up with demand.
Then in 2013, with record resource production,
demand growth suddenly began to slow and
commodity prices fell. So is the party over?
Emerging markets have slowed, but we have to look at
long-term prospects. The IMF is forecasting that
emerging Asia will average 6.5% growth through 2020;
Latin America and Africa will grow at 3.2% and 6%
respectively. The OECD is forecasting that the global
middle class will increase from 1.8 billion in 2009 to 3.2
billion in 2020. That’s a lot of new consumers and a lot
of commodities needed as people get wealthier.
So the commodity supercycle is not over, but when
demand depends so much on emerging market
strength, we have to anticipate volatility. Prices will
recover but not to the lofty heights of 2007. This is
good news for Canada because we have some of the
most efficient natural resource producers in the world.
Visit Powerofcanada.ca for more information.
-Hendrick Brakel, CCC
This week we recognized Chamber
week by hosting an event each day of the week to provide you with the
opportunity to network, dine and engage to learn what we do for the business
Have you caught yourself wondering what a Chamber of Commerce is and what it
does for business? Here are some myth's - debunked.
* Myth #1: The Chamber
of Commerce is a Bank. We are not a bank, we are the most
broadly-based business organization working on behalf of small to large
* Myth #2: The Chamber
is a private club. We are an accessible, modern, organization
supporting local business in their community.
* Myth #3: Chambers
are a part of Government. Chambers of Commerce engage with all
levels of government as a voice, advocating on behalf of businesses, but are
* Myth #4: All we
offer is Group Insurance Benefits. Chambers have a long list of exclusive
member benefits to offer businesses, Group Insurance is just one of many.
So if you've been on the fence, now is the time to join your Kelowna Chamber of
Commerce and access Canada's largest business network. It's just smart
Kelowna’s Top Forty
Under 40 has officially reached the mid-way mark! With 21 remarkable people
across the valley having already been interviewed by the Daily Courier, the pressure
Haven’t submitted your
nomination yet? You’re in luck! We will be accepting nominations no later than
12:00pm on March 17th, 2015.
We’re looking for
individuals under 40 who have made meaningful contributions to the community
both professionally, and on a community level. Not a ‘business person’? That’s
okay! We are looking to celebrate all kinds of success and achievement – the
only rule is you must be under the age of 40.
To nominate someone,
simply send an email to email@example.com or call 250-469-7357 and tell
us why you feel they should be Kelowna’s Top Forty Under 40.
forty features will end June 17th, culminating in a wrap-up event on
June 23rd, 2015, celebrating the success of these remarkable
individuals and their accomplishments. For more details, or to hold your
ticket, please contact Stephanie at 250-469-7357.
wait for your nominations! See current nominees here.