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Commodities: Long-Term Demand Outlook

Long-Term Demand Outlook


ROLAND MORRIS: There's been much debate in the press lately about the commodity super cycle: whether it has ended or whether there ever was one.  As a firm, we believe in long-term commodity demand driven by emerging markets growth.  And as emerging markets develop, the per capita use of commodities will rise.  On a very long-term basis, we believe that the underlying demand for commodities will continue to grow.


Globally, we're not running out of commodities but we're running out of cheap commodities. It has become increasingly difficult to develop new resources for commodities.  Because of that, we think that commodity prices will likely rise in the long run.  We continue to believe that emerging markets growth will be the driver of growth over the next 10 to 20 years. Between the difficulty of obtaining new commodity sources and continued emerging markets growth, we believe the underlying demand will continue to grow.


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The UBS Bloomberg Constant Maturity Commodity Index (CMCI) is composed of futures contracts on 28 physical commodities and buys and sells contracts with maturities of three months and, for some commodities, up to three years. The Morningstar Long/Flat Commodity Index is a fully collateralized commodity futures index composed of 19 commodities that employs a risk-managed approach to commodities, turning “flat” or moving to cash if signals indicate falling commodity prices.


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