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GLOBAL: Commodity squeeze here to stay - McKinsey

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Consultancy McKinsey & Co has said that the first decade of the 21st Century has wiped out all efforts to lower commodity prices in the 20th Century and that volatility is here to stay.

In its report, Resource Revolution, McKinsey said that commodity prices have risen by 147% in real terms in the last ten years. With global middle class expected to inflate by 50% to 3bn people by 2030, the consultancy said that companies, and particularly those reliant on food commodities, face supply squeezes and high volatility.

While the higher number of middle class consumers presents opportunities to drinks companies seeking to sell premium spirits, wine, beer and soft drinks, it also creates further supply issues.

"This soaring demand will occur at a time when finding new sources of supply and extracting them is becoming increasingly challenging and expensive, notwithstanding technological improvement," said McKinsey. "The past decade alone has erased a 100-year decline in resource prices as demand for commodities has surged," it said in its report, published this month.

The consultancy group predicted that tight supply and demand will create volatility in commodity markets for the next 20 years. However, it said that its studies have shown that there are answers to the squeeze on resources. The main question, it said, is whether governments and companies react quickly enough to the changing climate.

To view the full report, click here.


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