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Crop prices ride rocket

Commodity prices rocketed up the maximum daily limit this week and some are drawing comparisons between the current price conditions and those of the 1970s.


June 13, 2008
By The London Free Press

Topics

June 12, 2008

There is awe in Al
Mussell's voice as he reviews the stunning figures from agricultural exchanges
yesterday where prices rocketed up the maximum daily limit.

"Wow,
incredible," said Mussell, a senior research associate at the George
Morris Centre, an agricultural think-tank based in
Guelph.

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For the first time corn
climbed above $7 a bushel for the nearby contract on the Chicago Board of
Trade. Soybeans jumped to $15.16 a bushel and wheat closed at $8.69.

At the Baking Association
of Canada, president Paul Hetherington also had his eye on crop prices, plus
energy where oil shot up $5 a barrel to $136.38.

"The energy issue is
going to be problematic for not only bakers, but throughout the food supply,
for consumers as well as industry at large," said Hetherington.

Mussell said the last time
there was a similar situation was in 1973. That increase in commodity prices
set off four years of higher prices.

The current farm commodity
price runup is unlikely to be a blip, he said.

Part of the increase is due
to rising demand from southeast Asia as a growing middle class demands better
food.

Another factor is the
bio-fuel industry where new plants are coming on stream and using more of the
world's crops for fuel, he said.

"When you have plants
built and investment made, people are going to want to make use of those
assets," said Mussell.

Hetherington also doesn't
see a quick reversal for rising prices.

"There might be some
ups and downs, but the long-term view of this is it is going to go up," he
said.

Prices for baking products
have already risen about 10 per cent and that will likely continue to climb, he
said.

But Hetherington said it is
far more than just the rise in prices such as wheat, which has doubled in the
past year.

"We are talking about
some potentially significant increases on electricity in the next couple of
months, natural gas is under pressure which we use a lot of for our ovens.

"Shippers are starting
to put fuel surcharges on their shipments just as airlines are with passenger
travel."

The latest crop price surge
is being blamed on heavy rains damaging the critical
U.S. corn crop, a primary source of
livestock feed and ethanol.


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