China on the Rise

Global traders got another reminder this week that China is on the rise, as a new report from the International Monetary Fund showed that China's economy has surpassed the US by a metric known as purchasing power parity. Although not the primary model watched by economists, PPP adjusts for price differences between countries, essentially giving China credit for its cheaper cost of living.

But, even by more conventional measures, China is rapidly approaching the United States in contention for the world's largest economy and is expected to surpass the US within the next decade. China's economy is gaining on the US due to China's rapid growth, which is nearly twice the rate of the US.

Nonetheless, Americans are continuing to get good economic news, including a report out Friday morning that showed an additional 350,000 jobs added over the last month.

Growing US and Chinese economies should provide a boost for commodities, as expanding demand should consume more grains, meat, metals, and fuels, but many commodities markets are still stuck in a quagmire due to overexpansion of supply in the last few years. Longer term, economists expect rising demand to eat into oversupply and boost prices again.

Oats Turn Soggy

Oats prices are at a two-year low, breaking beneath $3.00 per bushel this week. Prices are grinding lower as stockpiles of the grain are rising to more than double last year's level.

Canada, the world's largest exporter of oats, had been having trouble finding enough railcars to move the grain to the US, as the booming oil industry was absorbing excess rail capacity. To alleviate the Canadian glut, and resulting US shortage, the Canadian government mandated that rail companies needed to increase grain capacity, which allowed the oats to flood US markets, knocking prices sharply lower.

Oats' decline is even more momentous to market watchers because it is occurring while the other grains are rising. Corn, wheat, and soybean prices all bottomed out at the beginning of October and have climbed substantially since, but oats have been independently weak, disappointing oat farmers and investors.

For consumers, cheaper oats prices may give them yet another reason to add the heart-healthy grain to their morning routine.