Friday, April 25, 2008

High food prices

I saw a media report that the price of wheat and corn increased by 60% over the past 12 months. The price of rice increased by more than 100%.

The large increase in food prices is partly due to reduced supply and higher real demand. But the large increase is exaggerated considerly by speculation by the hedge funds. Ordinary people now start to hoard the grains, contributing to the speculative fever.

Like all speculation of this kind, the bubble will burst and the prices will come down to the correct market level. It will be higher than 12 months ago, but should not be at the high levels today.

My advice: buy enough rice to meet your family needs. Do not engage in the speculation and hoarding. If you do, be prepared to suffer a loss when the market drops.
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3 comments:

Anonymous said...

The worst may be yet to come because currently these commodity futures prices have arisen so much. The current price we are getting at stores may be due to existing stock bought at cheaper prices earlier. When these are exhausted, you can never tell whether the new stock may see a shocking increase in price. That's why people are worried and want to stock up but still only a short term measure.

April 25, 2008 12:56 PM
Anonymous said...

It becomes a norm to eat out or have takeaway for lunch and dinner, even for housewives. Just take a look at the various food courts and hawker centres during meal times.
Does this contribute to higher cost of living?

starlight

April 25, 2008 3:35 PM
Anonymous said...

I think hedge funds is only part of the problem.

International news is saying that the following are the reasons for escalating food prices and I think they make sense:

1) Rising world population
2) High food demand
3) World’s diet leaning towards meat products which need more land to produce
4) Escalating oil prices
5) Rising prices of petroleum products, eg. fertilizer, gasoline, electricity
6) Changing climate causing poor harvest
7) Impact of bio-fuel on agriculture and food prices
8) Growing consumer demand in China and India
9) Low global food reserves due to market responsive agriculture
10)Curbing of food exports by agriculture-producing countries

April 30, 2008 11:18 PM

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