Friday, July 20, 2012

Food prices to rise for months?

Following  up on our past comments (http://tradingjournalstockjunky.blogspot.com/2012/07/handicapping-escalation-in-arab-spring.html) on rising food prices, we found the below article at commodityonline.com concerning the situation.

US drought to hike global food grain prices


NEW YORK (Commodity Online): With the drop in production of foodgrains in US as the the country hit by the worst drought hit in past 25 years is likely to hike the global as well as domestic food prices for coming months.

Presently, price of most of the agri-commodities like wheat, corn, oilseeds among other are high on rising demand and is likely to move further.

US is the largest producer of oilseeds, corn and wheat in the world and with the drought like weather over the major growing areas affected the crop production.

According to Tom Vilsack, Agriculture Secretary, around 61% of the total agricultural land is characterised as being impacted by this drought, which includes 78% of the corn crop and 77% soybean is now in an area designated as drought impacted.

While, the demand for the commodities rising tremendously on the back of rising population. The demand for wheat, corn and oilmeals also been raised on the back of rapid growth of poultry and live stock industry.

In Chicago Board of Trade (CBOT), for August delivery, wheat traded up 6 cents to 909 2/8 cents per bushel, soybean traded up 14 cents to 1697 4/8 cent per bushel and corn rose 1 6/8 cents to 796 6/8 cents per bushel on 19th July.

(http://www.commodityonline.com/news/us-drought-to-hike-global-food-grain-prices-49265-3-49266.html)

We think that a sustained rise in food prices could further strain socio-economic conditions in the developing world. In addition, a rise in prices would also pressure inflation rates in the U.S., putting pressure on the Federal Reserve to hold off on any further monetary stimulus. Good thing the Fed looks at core inflation rates.

Update- The headline for the article is likely inciting a response to read the piece (and we have to admit we were drawn in) but it most definitely makes the point concerning food. Registration may be required.

http://www.ft.com/intl/cms/s/0/9989dc80-d1c5-11e1-badb-00144feabdc0.html#axzz213HGctzZ

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