Nothing but negotiation

The Gap Partnership

Rising commodities prices driving up CPI

Corn and wheat prices are driving up the consumer price index and may require international business negotiations to get back on track.

13 October 2010

International business negotiations may be required to get the global market for agricultural commodities back on track, as shortages and speculation prompt wheat and corn prices to soar.

According to the latest survey by the Financial Times and Harris, most in France, Germany and Spain feel that speculation is primarily to blame for rising food prices, something that suggests there would be support for tighter regulation on commodities trading.

Currently, commodities prices are having a significant impact on the consumer price index, with corn, barley and wheat both rising significantly in the past several months.

Most recently, warnings by the US government of "dramatically" lower supplies of these commodities than many investors had expected prompted corn to rise by 13.5 per cent and what to jump by ten per cent.

Interestingly, the FT/Harris poll indicated that UK residents are most likely to attribute the impact these soaring commodities are having on consumer prices to adverse weather conditions, which prompted poor harvests in Russia, Ukraine and Canada.

Both Russia and Ukraine have already put in place strict quotas on how much grain they export. Trade negotiations may be required to boost supply from these countries into western Europe and, subsequently, lower food prices.

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