Commodity Markets in Turmoil
Prices of grains have been rising in recent years and that could spell trouble for the South’s farmers and policymakers alike.
“Commodity markets have been on a rollercoaster for the last year to two years,” Louisiana Rep. Noble Ellington told Sunday’s audience at the Southern Legislative Conference’s Agriculture and Rural Development Committee meeting.
The commodity markets are volatile, experts at the meeting agreed.
Jack Kelly, a representative from Perdue Farms said, “We in the poultry business are in a serious crisis.”
Costs for the poultry business have skyrocketed nearly $5 billion. Chicken cost 80 cents per pound in the late 1980s and early 1990s—but chicken today costs $1.20 per pound. Perdue forecasts chicken will hit $1.40 a pound by year’s end.
“We can’t have a country that’s using food to pay for our fuel,” Kelly said.
Bailey Ragan, vice president and general manager of the Grain Division of Bunge North America added to that—giving the audience of Southern legislators a global perspective on the skyrocketing price of grains and food.
“I’m afraid what I’m getting ready to show here is probably not going to make anybody feel better about the situation,” Ragan said. Food stocks are at all-time lows, he said. According to Ragan, $140 billion of outside money is invested in the commodity markets—and a lot of that money is speculative.
And everyone’s seen the impact of speculation on the price of oil, he added. “You’ve got a lot of these funds that don’t even know what a kernel of corn looks like—and they don’t care. They just know that this is a safe place to park their money.”
The weak dollar is also contributing to the volatility of the commodity markets. “It’s got our commodities and the demand for our commodities at an all-time high,” he said. And demand for commodities is not just due to the U.S. demand. Population giants like China are also consuming more and more commodities such as grain and soybeans, Ragan said.
Oil prices are also taking a toll on the commodity markets. “Increased cost of freight and the cost of fuel is going to keep the cost of these commodities running high,” Ragan said.
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