Commodity mania was just about at its peak in 2008 when the OECD published a breathlessly anticipated report on global food supply and prices. There was a concurrent conference in Rome that attracted a fair amount of media attention. The challenges of feeding a growing world were front and center.
Naturally enough, the issue got pushed to the background amid the subsequent global economic collapse. Slowly but surely, however, the issue of food security, scarcity and pricing is creeping its way back to the foreground. Saturday's editions of The Wall Street Journal featured an article entitled "Commodity-Cost Jump Threatens Rebound":
From corn to crude, prices for a wide range of commodities are on the rise across the globe, a trend that underscores -- but could also hinder -- a gathering economic recovery. In recent months, global food prices have been growing at a rate that rivals some of the wildest months of 2008, when food riots erupted across the developing world. Higher prices could be a positive sign that companies are gearing up for a rebound in consumer spending, or the harbinger of a return to the upward spiral that plagued consumers before the recession took hold. The surge in commodities "is a reflection of extremely strong demand in the emerging world, and growing hopes of stronger demand in the developed world," said Jim O'Neill, head of global economic research at Goldman Sachs in London. It is "encouraging so long as it isn't too persistent." But Hugh Grant, chairman and chief executive of St. Louis crop-biotechnology company Monsanto Co., said the recession merely "masked" the 2008 food crisis. The price of a bushel of corn -- a ubiquitous ingredient in the U.S. diet -- rose 24% since Sept. 1. In Thailand, the price of a metric ton of rice, a staple across the region, stood at $618 in December, up 11% from September, but well below a peak of about $1,000 in April 2008. An index of global food prices compiled by the United Nations jumped 6.9% in November alone from the month before.
It is worth noting that, while dairy prices managed to flirt with multi-decade lows, other markets fell to levels that would have been considered on the high side five or ten years ago. Look at corn. Yes, corn prices came unglued. But in the face of (a) worldwide economic collapse and (b) the largest crop ever growing in the field, nearby futures never got lower than $2.90-$3.00/bu. Those used to be high prices. The CRB Foodstuffs Index offers an interesting view of what looks to be a structural shift that could last for a long, long time.
