Harold L. Sirkin

Jan 13 Although the fourth-quarter 2009 statistics weren't yet in as I wrote this, some predict that the U.S. economy may have expanded in the second half of last year by more than 3 percent. Europe appears to be lagging, but the economies of China, India, Singapore, Indonesia, and South Korea, among others, are growing robustly again. The Great Recession of 2008 and 2009 may be over in most of the world.

What this also means is that U.S. companies struggling to regain momentum will pay higher prices for commodities and other raw materials. Some experts still predict a double-dip, or W-shaped, recession, with a further downturn coming later this year.

While it's still too early to know how the U.S. economy will perform, be assured that our competitors will not be standing still. U.S. companies will be competing with companies from all over the globe—for markets, customers, talent, and the materials needed to produce whatever they sell. Recessions and recoveries don't change the laws of supply and demand; they magnify them. As Chinese and Brazilian companies increase production, they will heighten demand for certain commodities, which will put upward pressure on prices for everyone, even companies whose domestic markets remain in a slump.

It's also important to remember that there's more at play here than simple inputs and outputs. Several other factors will also contribute to the prices companies pay for seed, feed, fertilizer, pesticides, oil, coal, cotton, natural gas, iron ore, copper, zinc, tin, nickel, bauxite, potash, gypsum, rubber, and virtually everything else. The three most important factors are the continuing growth of the middle class in the rapidly developing economies of Africa, Asia, Latin America, and Central and Eastern Europe; the large-scale infrastructure investments that are taking place in those countries; and the emergence in Africa, Asia, Latin America, and the former Soviet empire of a huge low-income-consumer cohort.