by Connie Madon
After last year’s crash, commodity prices have been sloshing around without too much direction. Oil has been a noticeable standout, however, moving from $32 per barrel to $74 per barrel.

Sugar has moved from about 15 cents per pound to 22 cents per pound, based on supply and demand factors.

Commodity traders are in a quandary about prices going forward. They are looking primarily at China and the U.S. dollar, reports BusinessWeek.

China has been stockpiling oil with money from its stimulus package. Pat Flynn of PFGBEST believes this was a key factor in the recent surge in oil prices.

China is cracking down on mortgage lending. Some worry that China will rein in its massive stimulus that is now in effect.

Commodities are denominated in U.S. dollars. As the dollar weakens, commodity purchases become cheaper. The U.S. nearby dollar contract has dropped from about 87 to 78 (the U.S. dollar is priced on a basket of currencies.) The worry here is that the massive U.S. budget deficit will weigh on the dollar, forcing it still lower. This could trigger a bout of inflation and consequently a bull move in commodities.

However, if the dollar stabilizes and China reins in spending, commodity prices could drop and trade on supply and demand factors.

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