WHAT'S BEHIND SOARING COMMODITY PRICES

WHAT'S BEHIND SOARING COMMODITY PRICES
Jose Graziano da Silva

MAY 2008 (IPS) - There are two distinct elements driving the current commodity price increases: one is financial; the other is the hitherto unheard of shift in demand: the expansion of consumption in poor countries, writes Jose Graziano da Silva, regional representative for Latin America and the Caribbean at the UN Food and Agricultural Organisation (FAO).

In this article, the author writes that in 2007 speculation emerged as the factor responsible for the sustained increase in prices: in a climate of economic uncertainty, many investors sought shelter in commodity funds, agricultural and non-agricultural.

Certain lessons can already be drawn. The first regards the long-apparent risks implicit in dependence on exports of raw materials. The second is the necessity of having a counterweight to economic policy to broaden the range of producers that benefit from cyclical increases in the demand for food. The strengthening of small agricultural producers and farmer cooperatives, for example, would widen the distribution of wealth in a way that would increase the chances of sustainable growth.

/NOT FOR PUBLICATION IN AUSTRALIA, CANADA, NEW ZEALAND, CZECH REPUBLIC, IRELAND, POLAND, UNITED STATES, OR UNITED KINGDOM/ (END/2008)