Bloomberg

Nigel Stevenson and Brett Foley

The fundamentals of commodities are “unimpaired” and prices will rebound when a lack of new supply leads to shortages, said Jim Rogers, chairman of Rogers Holdings.

“Commodities will be the place to be if and when we come out of” the downturn, Rogers said yesterday in an interview from Miami. “The only thing where fundamentals are unimpaired are commodities. Farmers cannot get loans for fertilizer now. Nobody can get a loan to open a zinc mine. So we are going to have some serious, serious supply problems before too much longer.”

The Reuters/Jefferies CRB Index of 19 commodities has plunged 53 percent from a record in July on concern that a global recession will sap demand for raw materials.

Rogers said crude oil and agricultural commodities were the most likely to have shortages and the outlook for zinc and cotton had “improved.”

My comment:For readers it must get redundant seeing quotes from people like Rogers who continue to support commodities when the CRB is down 53% sine July 08. However when he says that commodities are unimpaired he is correct. I have highlighted the IEA report about depletion of oilfields. The depletion continues and will certainly effect supply going forward. The same is true in agriculture. The grain inventories are still low historically and with these low prices and the inability of farmers to get loans for fertilizers and seed it would appear the situation of low prices will cure itself in time. Unfortunately when demand comes back prices are going to overshoot to the upside because of the collapse in investment in capacity. Uranium is good example as it had its crash over a year ago and now is silently creeping back up in price as producers announce all kinds of production problems ie Cigar Lake, Dominion etc..As a matter of fact a candidate for my stock of the year for 2009 is a low cost uranium producer that is hitting production targets and expanding.

John Polomny
The Real Deal