USDA Report: Commodity prices to rise again

Articles
March 06, 2009

USDA Report: Commodity prices to rise again

A new report from the USDA forecasts that commodity prices this year will remain at above the historical levels. For the third year in a row, this will be quite a blow to poor countries. However, forecasts at the annual conference in Washington did speculate lower prices than the first half of the year, when corn, wheat, soyabean and rice hit all time highs. According to the report, many factors contributed to the increase in food commodity prices including increased global demand for biofuels, feedstocks and adverse weather conditions in 2006 and 2007 in some major grain and oil seed producing areas; the declining value of the U.S. dollar; rising energy prices; increasing agricultural costs of production; growing foreign exchange holdings by major food importing countries; and policies adopted recently by some exporting and importing countries to mitigate their own food price inflation. Joseph Glauber, USDA chief economist, said the impact of the economic crisis on food consumption would depress agriculture commodity prices temporarily, but he warned that prices would remain well above average for the eight years since 2000. Mr Glauber went on to tell the Financial Times that the outlook was "for a return to higher prices" as some of the pressures that drove last year's increases and relatively strong growth in emerging markets "will return to play a major role" this year or in early 2010. "This is going to be again a tough year [for poor countries]," he said.

A new report from the USDA forecasts that commodity prices this year will remain at above the historical levels. For the third year in a row, this will be quite a blow to poor countries. However, forecasts at the annual conference in Washington did speculate lower prices than the first half of the year, when corn, wheat, soyabean and rice hit all time highs.

According to the report, many factors contributed to the increase in food commodity prices including increased global demand for biofuels, feedstocks and adverse weather conditions in 2006 and 2007 in some major grain and oil seed producing areas; the declining value of the U.S. dollar; rising energy prices; increasing agricultural costs of production; growing foreign exchange holdings by major food importing countries; and policies adopted recently by some exporting and importing countries to mitigate their own food price inflation.

Joseph Glauber, USDA chief economist, said the impact of the economic crisis on food consumption would depress agriculture commodity prices temporarily, but he warned that prices would remain well above average for the eight years since 2000.

Mr Glauber went on to tell the Financial Times that the outlook was "for a return to higher prices" as some of the pressures that drove last year's increases and relatively strong growth in emerging markets "will return to play a major role" this year or in early 2010. "This is going to be again a tough year [for poor countries]," he said.

Christopher Delgado, a policy adviser in agriculture at the World Bank, warns’ that the food crisis in not going to gone away and in fact, is coming back. Although their was a drop in food prices, corn prices were at least 40 per cent above the 2003-06 average, and rice prices 100 per cent higher.


 
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