A Day's Wages for a Loaf of Bread

Corn & Wheat Falls as Importers Refuse to Buy at High Prices

September 24, 2010

Commodity Blog - Previous rally of corn and wheat prices caused importers to shun US supplies. They simply don’t want to buy at such costs, as a result the prices dropped today.

Before this week corn prices surged 37 percent since the end of June, causing exports for delivery in a year started September 1st to decline 3.8 percent to 561,812 metric tons in the week ended September 16th from a week before. Wheat prices touched $5.2375 per bushel on September 20th, the highest level since September 30th 2008. December futures for corn delivery slipped $0.0575 (1.1 percent) to $4.9925 per bushel as of 13:15 on the CBoT.

Egypt buyers canceled purchases totaling 220,000 metric tons of wheat, while other buyers declined an additional 275,000 tons. Wheat climbed 29 percent this year. December futures for wheat delivery went down $0.225 (3.1 percent) to $6.9725 per bushel by 13:15 on CBoT.

Starbucks Passing Dramatically Increased Commodity Costs onto Customers

Starbucks is responding to the recent dramatic increases in the price of green arabica coffee, currently close to a 13-year high, as well as significant volatility in the price of other key raw ingredients, including dairy, sugar and cocoa.

September 23, 2010

Money Talks News - Starbucks announced Wednesday that they'd be raising prices soon, apparently due to higher bean costs.

"Over the last six months a highly speculative green coffee market and dramatically increased commodity costs have completely altered the economic and financial picture of many players in the coffee industry," said Howard Schultz, the chairman, president and CEO of Starbucks.

"And while many, if not most, coffee roasters and retailers began raising prices months ago, we have thus far chosen to absorb the price increases ourselves and not pass them on to our customers. But the extreme nature of the cost increases has made it untenable for us to continue to do so and we have been forced to take the steps we announced today," Schultz added.

Not everything's going up: Starbucks expects to maintain its popular $1.50 tall brewed coffee, but will probably raise the price of more labor-intensive and larger-sized beverages.

But if you want to save some bucks at Starbucks, there's no shortage of official advice everyone already knows ...

Commodity Prices Buoyant in 2009; Expected to Increase Further in 2010

December 30, 2009

IMF - Commodity prices were surprisingly buoyant in 2009, and are expected to increase further in 2010 as world activity expands after the global crisis.

At the outset of 2009, the sharp declines in prices of the previous year seemed to foretell the usual misery for commodity markets during and after a global downturn. In the end, however, prices rebounded relatively soon and staged a strong rally from the second quarter of 2009—despite generally high inventories after the weakening of demand in the global recession of 2008–09 (see Figure 1).

This commodity price rally at the early stage of the recovery in global industrial production (and ahead of global economic growth) contrasts with past experience. After previous global industrial downturns, prices typically continued to fall or rose at very modest rates, far below the increases recorded this year.

The IMF’s commodity price index, for example, rose by over 40 percent in the 8 months since global industrial production reached a trough in February 2009. In contrast, after earlier downturns, it rose by only 5 percent on average over the 8 months after a trough. However, commodity prices also fell faster and by larger magnitudes in the second half of 2008 than in previous recessions.

What explains the early rally in commodity prices? As for prices of risky assets more generally, the initial impetus came from the perception that the worst of the global recession was over and that the wide-ranging public intervention had succeeded in lowering uncertainty and systemic risks in the financial sector. Against this backdrop of an expected improvement in near-term outlook, commodity markets benefited from the increased incentives to hold inventories ...

Looking at commodity price prospects from a longer-term perspective highlights how prices are expected to remain high by historical standards. The effects of the crisis have been to reduce prices somewhat below their 2008 peaks, but demand is expected to continue rising at a solid pace as industrialization continues in emerging and developing economies. Accommodating this demand will eventually require further capacity expansion in many commodity sectors, with some need to tap higher-cost sources.