Mr. Jim Rogers, the greatest proponent of commodities in the world and author of best selling books like ‘Hot Commodities, Investment Biker and Adventure Capitalist’, feels that the bull rally in commodities that began in early 1999, will last till 2014. Rice, sugar, coffee, rubber, cotton and copper are among his favourites. According to him, the 20th century witnessed three long commodity bull runs during 1906-1923, 1933-1953 and 1968-1982, each lasting on an average of around 18 years. Stocks (in the US) have alternated leadership in regular cycles averaging 18 years. We are currently in the midst of another bull run in commodities, which started in early 1999. If history is any indication, the time for peaking of the commodity cycle would be anywhere from 2014-2022. Commodity prices are still far from their all-time high levels. Cotton is still 50% below its all-time high, while soyabean is 60% away from its highs. Sugar prices are 80% below all-time highs, coffee 70% and so is the case with wheat and rubber. Energy prices are near all-time highs, but are still lower when adjusted for inflation.

Jim Rogers goes on to add:
"But overall, the commodity situation is not simple, though it is a function of demand and supply. It is very complex with many factors contributing to world-wide shortages. In the final analysis, there are shortages and shortages are getting worse in case of commodities. In 2018 or so, everybody is going to be shrieking about commodities. There will be shortages and commodity prices will rise. Increasing agricultural production is not as simple as planting a few seeds. Take coffee, for instance. It takes five years for a coffee tree to mature. If one decides to go into the coffee business today, it would take a long time for it to come on stream and mature. I still don’t expect to make as much money from gold as say soybeans or corn. Countries that are rich in raw materials are better places to invest. In North America, Canada could be the best place to be — stock market or even currency. Canada is a commodity-based economy. Australia and Brazil are other places to watch out for, though places with geopolitical risk (like Congo) could be avoided. Retailers in Canada, Australia or Brazil are going to be better off than in other countries. There should be an inflationary trend going forward from the rise in commodity prices. But, then, the US government numbers aren’t an accurate indicator of actual inflation in the country. The bond market peaked somewhere in ’03 and it is heading for a secular bear run. In my opinion, bonds are finished. Equities are in for volatile situations. So be careful. One could consider commodity as an asset class for investment purposes. Rice, sugar, coffee, rubber, cotton, copper are expected to see higher prices over the longer term. India has the advantage of having great diversity of commodities. If proper initiatives are taken, it could be among the major world commodity centres."

Jim Rogers may be an unabashed commodity bull, but he is clearly right in his optimism. As he alludes, commodities take years of planning to produce. A new copper or zinc mine takes years to commission. Similarly, agricultural commodity production cannot be doubled overnight. It would take years to increase production. For a long time, with western markets fully matured, the demand for commodities remained flat, mines remained underutilized and investments in commodity production languished as the demand just wasn’t there. With the awakening of China and India from centuries of slumber, all that is changing. China has become a voracious consumer of commodities as it embarks upon massive industrialization and India is not too far behind. With the growing prosperity of these two Asian giants, which account for almost half the world population, the demand for commodities is likely to increase in an unprecedented way. Years of under-investment means that no plans were created for expanding capacities. New capacities are expected to take many years to come on stream, by which time the demand from China and India would have only increased further. So Jim Rogers doesn’t appear to be too far off the mark when he says that the commodity bull run is far from over.