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In the latter part of Rick Blume's presentation on Navigating Turbulent Times in the manufacturing and supply chain worlds, he touched on a number of elements driving growth in the US economy. For example, "construction equipment demand in North America is forecast to grow 7% annually through 2015." As a result, we are seeing continued recovery in construction equipment in part because "rental fleets are expanding and used equipment prices are rising" which in turn is benefiting producers and suppliers in the supply chain. In addition, mining equipment demand (largely due to global growth) is up "over 10%" as well.
Blume suggests that agricultural equipment production "will remain high in 2012" due in part to another great year for farmers. Farmers, Blume suggests, are sitting on cash and the outlook is good for them -- just as it is bad for organizations in food, CPG and related markets on the other end of the agricultural commodity buying supply chain, considering rising prices. Specifically, "high commodity prices, strong exports, and low interest rates are expected to continue" helping further drive net farm income, which "was up nearly 19% in 2011" which, adjusted for inflation is the highest percentage growth level in 40 years. The fact that population growth in emerging markets (e.g., China, India, Brazil) is continuing will only help agricultural producers and the entire supply chain tied to it.
Other markets Nucor focuses on are not quite as rosy. Construction still remains weak. But "once construction comes back in a meaningful way," Blume notes, "we should see a more robust demand for steel markets" overall. Automotive is a brighter spot, but not as strong as agriculture growth overall. Consider how US light vehicle sales rose from 10.4 million vehicles in 2008 to 16.6 million in 2016, representing over a 50% return.
Stay tuned as our live coverage of Commodity EDGE continues.