commodity prices are challenging

We now have higher commodity prices, lumber being a natural laggard in lower housing starts.

Commodities have largely been forgotton by the investment community over the past 40 years, except for producers. During that time subsidies or taxes have been built up, all based on the concept that commodity prices would stay low and producers would always be price takers. This has changed and the fabric that has been built up is under pressure and looks like it will tear. Many countries, especially asian countries subsidize (USA and sugar) their commodities. As the price rises it takes more and more of their GDP to service these subsidies. Do they have a choice? Maybe not. The cost of production for commodities has risen and when they can't be passed on the producer looks for alternatives. The catfish farmer fills in the pond because he can't afford corn to feed the catfish and plants soy (http://www.iht.com/articles/2008/07/18/business/18catfish.php) The higher cost of production of commodities is showing that the best place to be is in the commodities themselves, not in the producers.

Max