Global food-price-rise risk up: Australia bank11 July 2012, by Ray Brindal - Canberra (MarketWatch)
http://www.marketwatch.com/story/global-food-price-rise-risk-up-australia-bank-2012-07-11A sharp rise in the price of corn, soybeans and wheat has once again raised the specter of global food price inflation, analysts at Commonwealth Bank of Australia warned Wednesday.
Prices for grains and oilseeds, the staple foodstuffs for human and livestock populations worldwide, spiked higher in June and have risen further in July, they said, but rice isn't caught up in the current price escalation.
Corn prices jumped 41% in June and early July, wheat 33% and soybeans by 26%, according to a note issued by CBA chief economist Michael Blythe and agri-commodities strategist Luke Mathews.
With any such commodity price spike, this episode reflects weather-induced supply issues, with the growing risks to U.S. crop production of particular concern, they said.
Most of the growth in demand for these crops is coming from China and other emerging and developing economies and these countries would bear the brunt of any sustained lift in the prices of staples, they said.
As a result, global trade flows would be affected by the possible scarcity of corn and soybeans for export in exporting nations, they said.
Among industries likely to be affected, livestock producers would experience input cost pressures, food and beverage manufacturers would face margin compression and the biofuels sector could be squeezed between higher input costs and falling oil prices, they said.
Although Australia exports two-thirds of its farm production and is a beneficiary of higher prices, not all outcomes would be positive for Australia, such as if higher food prices weighed on consumer sentiment and spending appetite, they said.
The analysts also warned the direct inflation impact of higher food prices is significant for emerging and developing economies but generally low for advanced economies, where food accounts for a much smaller share of consumer spending.
"Spikes in food prices can spill over beyond the broad economics into other areas as well," they said. "There are indications, for example, that periods of rapid food` price rises are often followed by periods of above-average civil conflict."
