BRICS Nations' Economies Important to Watch

Tuesday, Jan. 3, 2012 With Markets closed on Monday and with the weather in South America so much in the recent commodity market news, I visited with Dr. Dave Kohl, Globetrotting emeritus ag econ professor from Virginia Tech, about what market indicators producers should be paying attention to.

Dr. Kohl says it is critical to monitor the BRICS nations --- that is Brazil, Russia, India, China and South Africa --- and how their economies are faring as it has direct correlations on U.S. commodity prices.

Dr. Kohl: “In the past decade, while they are only 20 percent of the world economy, they have been 50 percent of the world’s economic growth. And of course they are demanding food, fiber and fuel which ag producers throughout the U.S. but particularly in the Northwest produce and that is why we’ve been having some very, very good times in agriculture.”

He shares his 8-5-3 rule.

Dr. Kohl: “The 8-5-3 rule is simply bringing global economics right to your kitchen table or your iPad. If you happen to see these BRICS nations growing at an 8 percent growth rate then there is going to be high demand for food, fiber and fuel. However, if that growth rate goes back to 5 percent it will take 20 percent right off commodity prices ranging from all the way from wheat, corn, soybeans, butter, oil, steel and copper. If these nations go to a three percent growth rate, that means they are officially in a recession and this could be a foreteller of the collapse of commodities (prices).”

Dr. Kohl stresses that producers need think globally but act locally.

I’m KayDee Gilkey and that’s Market Line on Northwest Aginfo Net. Now this.