Globalization

Attended a conference today - on commodities.

All of these guys are talking about the supply and demand, and looking at the growth in crop yield, planting vs the stockpile and usage rate etc.

Got me thinking, a lot of these food increases kind of "depend" on the demand from China and India, right? What about their transportation and logistics team?

My thought is this.
Globalization has been going on the past ... century? Here is my theory of the steps.
1. Urbanization through cars
2. Inter-state-anization through better road infrastructure.
3. Nationalization through railways
4. Globalization through more efficient ships and flights.

Now, there has been a hick-up in this. Up until globalization, we knew what we were dealing with- we slowly built the logistics operations to fit the needs of the national demand. However, once the globe opened up, these systems were put under supreme stress.

This is complicated by the problem of developing nations (such as BRIC) which have very underdeveloped transportation systems. Globalization only provided the means for the middle 50% of the transportation. The other 50%, split equally by exporting nation and importing nation, puts on a very big burden on the system. We all know that although we pour money into African Aids, most of them never see the light of the day - all because the last 25% is very inefficient.

So, as we see the prices increase, we are expecting one thing - supply to increase. This is classic theory in supply and demand. If there is a high demand, there will be increase in supply. This is matched by the fact that in many countries there are developments in factories going on.

But what about railways and road systems? What about that first/last 25% of the transportation that is crucial? Who is taking care of them? China says they are going to have huge increase in grain import. How is the increase going to get to where it needs to get to?

On side note - it'll be interesting to see the effect of price on piracy. As price of fuel increases, there will be more and more shipping via sea. Recent example of Theft in the largest grain reserve in China and simple logic states that as these commodities become more valuable, it'll provide higher incentive to steal.