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Why global grain prices soar?

(People's Daily Online)

15:00, July 27, 2012

Some commentators believe that the world is facing a new food crisis as drought is hampering food production. Will the global market see a repeat of the 2007–08 world grain prices crisis? Will it cause a rise in China's already high consumer prices?

Surprising to see food price surges

Soybean, corn, and wheat futures had risen significantly on the Chicago Board of Trade (CBOT) for five consecutive weeks as of July 20. Over the past month, international corn and wheat prices have increased more than 45 percent, and international soybean and corn prices have both surged to record highs. International wheat prices recently reached its highest point in four years. It is quite surprising to see global food prices soar against the backdrop of a sluggish world economy.

Industry insiders said that the United States accounts for 40 percent of global soybean and wheat production, and directly influences global food supplies. International food prices have been soaring over the post month due to the prolonged drought in the United States and an influx of speculative capital, which put the global economy at risk of its third food inflation shock in five years.

The Food and Agriculture Organization of the United Nations warned that grain prices are set to remain high for at least another 10 years.

However, certain analysts do not believe the world is facing a new food crisis because the global supply of wheat and rice, the two commodities most important for food security, remain relatively plentiful, and their prices are still below previous highs.

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