The Rising Influence of Rising Affluence

[ilpapa]

FT



The world is facing a new food crisis as the worst US drought in more than 50 years pushes the agricultural commodity prices to record highs.

Corn and soyabean prices surged to record highs on Thursday, surpassing the peaks of the 2007-08 crisis that sparked food riots in more than 30 countries. Wheat prices are not yet at record levels but have rallied more than 50 per cent in five weeks, exceeding prices reached in the wake of Russia’s 2010 export ban.


The drought in the US, which supplies nearly half the world’s exports of corn and much of its soyabeans and wheat, will reverberate well beyond its borders, affecting consumers from Egypt to China.

“I’ve been in the business more than 30 years and this is by far and away the most serious weather issue and supply and demand problem that I have seen by a mile,” said a senior executive at a trading house. “It’s not even comparable to 2007-08.”

David Nelson, global strategist at Rabobank, added: “Today the [US crop] disaster is real, whereas to some degree the big run-up in prices in 2008 was speculatively driven.”<snip>