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Friday, Dec. 19, 2014

Markets Scramble to Buy Food

Posted Monday, January 31, 2011, at 1:25 PM

This week, food prices rose sharply on exchanges as investors, corporations and governments bought essential commodities like grains and livestock as well as other markets like cocoa, sugar and coffee.

Grains Gain as Supplies Wane

The protest movements in Egypt and Tunisia were attributed largely to rising food prices, where citizens have called for their leaders to step down amid double-digit food inflation. These protests have prompted vulnerable governments across North Africa and the Middle East to step up their import of grains, especially wheat.

Expectations that other nations like China, Russia and Indonesia may begin stockpiling grain have caused investors to believe that grain prices will drive even higher, especially since major producing nations like Australia, Argentina and Canada grew less grain this year than expected. This week, wheat shot to new two-year highs at $8.60 per bushel, while corn and soybean prices firmed on Friday at $6.50 and $14.10, respectively. Since last summer, the price of corn is up 101%, soybeans are up 52%, and wheat is up 96%.

Pork Charges Higher

Lean hog prices for February delivery made a new record high, reaching 85.8 cents per pound on Friday morning. Prices leapt on news that South Korea would increase its imports of pork significantly, as its herds are suffering from foot-and-mouth disease, forcing them to cull 2.4 million pigs. Furthermore, rising corn and soybean prices are making it more expensive for pork producers to feed their animals, causing them to ask for higher prices. Over the last six weeks, hog prices have risen 11 cents per pound, or 16%.

Softs Stay Strong

Coffee, cocoa and sugar, the so-called "soft" commodities, all rose sharply this week. Cocoa prices rose to one-year highs as conflict in the Ivory Coast, the world's largest cocoa producer, continued to threaten production. Coffee prices perked to 13-year highs at $2.46/lb as Central American and Southeast Asian producers fell short of expected production, while sugar approached 30-year highs again this week at 34.54 cents per pound. These price increases are slowly working their way into grocery bills, coffee shops, and restaurants as corporations pass their expenses onto consumers.



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Alex Breitinger
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Alex Breitinger, a 2009 graduate of DePauw University, is a commodity futures broker with Breitinger & Sons, LLC in Valparaiso. He can be reached at 800-411-FUTURES (3888) or online at www.indianafutures.com.
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