Agricultural commodities will likely resume their rise soon, as the global economy recovers, says Jacques Diouf, director-general of the UN’s Food and Agriculture Organization (FAO).
“When the recovery picks up, we will be back to square one,” he told the Financial Times.
The same factors that pushed up food prices last year are still relevant, including investment shortfalls, Asia’s burgeoning demand and the substitution of biofuels for food crops, Diouf said.
The dollar’s weakness also could boost commodity prices.
“We have all the elements of the crisis,” he said.
Some commodities, including wheat and rice, have dropped more than 50 percent since the middle of last year, as farmers in developed countries have increased production.
But commodity prices remain above levels that preceded the financial crisis.
And the so-called breakfast commodities, such as cocoa, sugar and tea, have hit 30-year highs.
Dean Oestreich, chairman of DuPont’s Pioneer seed genetics division, told the FT that the world faces a challenge to meet current and future food needs.
As a result, policymakers should allow the use of genetically modified products, he said.
“There is more agreement on this than I have ever seen.”
Investment legend Jim Rogers is the most prominent voice saying that commodity prices are headed higher.
To those who argue that commodities constitute a bubble, he tells Seeking Alpha, “A bubble is when assets are screaming to new highs every day, and everyone owns them. Right now, virtually no one owns commodities.”
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