Commodity prices soar as spectre of food inflation is back

Speculation and rumour could be the driving force behind sudden market rise in food prices

Philip Inman and Simon Bowers
The Guardian

The spectre of food inflation is back. Two years ago the world was gripped by the prospect of supplies running low, thanks to a combination of rocketing demand from emerging countries and tightening supply as farmers turned wheat fields over to biofuels.

But then along came the recession and commodity prices plummeted down and out of the headlines.

The price of wheat, oil and copper soared this week but the picture looks much less clear this time. Old-fashioned supply and demand is still at work, but there are fears that wild rumours and speculation are driving up prices.

Wheat prices, which are up 40% over the last month, reached a two-year high as concerns about a drought in Russia and rotting stocks of grain in India exercised markets in London and Chicago. Claims that a major crop failure in Australia, following an invasion of locusts and a wet summer in Canada, could lead to a worldwide shortage, have pushed up prices in recent weeks to levels not seen since 2008.

The rise in futures contract prices traded on the major markets also follows a United Nations report in June that warned food prices could rise as much as 40% over the coming decade, amid growing demand from emerging markets and for biofuel production.

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