Some recent headlines from the Financial Times: Soaring prices threaten new food crisis – Oct-08
Raw materials index soars to two-year high – Oct-08
Wheat and corn rise as Ukraine limits exports – Oct-07
Shortfall drives tin to record high – Oct-05
Food inflation is real, and it is here. A comment from a recent reader’s post: “Just yesterday I compared my receipt from a grocery run to prices I have from the same exact store from September 15, 2009. Bacon? Up 52% to $13.69 from $8.99 for 4 lbs. Butter? Up 73% to $9.99 from $5.79 for 4 lbs. Pure vanilla extract up 14% to $6.79 from $5.95. Chopped dried onions up a mere 2% but minced garlic (wet) was up 32%.”
Defensive buying by investors worried about the inflationary effects of quantitative easing (QE) is behind the latest rise in gold, metals and food commodities to near record levels this week. Analysts have the usual litany of explanations: Chinese demand; plans for more QE from the Fed; a billion bushels of grain a year going to make ethanol….as Agricultural commodities prices exploded again on Friday, threatening higher global food prices, US forecasters slashed grains production estimates after adverse weather damaged crops worldwide.
In Chicago, main agricultural commodities surged to daily fluctuation limits imposed by exchange rules, the FT reported. Traders, unable to use futures because of the daily limits, bid indicative corn prices to $5.60 a bushel in the options market, up 12.5 per cent. European wheat prices jumped by 10 per cent while the cost of other key commodities, including soyabean, sugar, cotton, barley and oats, also surged.