Hyperinflationary Policy Pushes Commodity Price Inflation

August 14, 2010 • 3:41PM

The price of wheat on international markets has increased 50% in one week, the steepest rate of increase ever, as revealed by former director of the International Food Policy Research Institute Joachim Von Braun. Although there is definitely an organic scarcity of the food needed to meet the real needs of a growing world population, and it is not clear whether the loss of Russian exports is going to be compensated for by the larger harvests in the United States and elsewhere, prices would not have increased so rapidly, had central banks not flooded the financial system with hyperinflationary liquidity.

Speculation in food futures has meanwhile gained a volume 50 times the amount of real food produced and traded worldwide! Thus, for every food item based on wheat, barley, maize, etc., food price inflation of 12-20% to the consumer is expected this autumn and winter. This is occurring in the Chicago Mercantile Exchange, a place where Obama should have some acquaintances.

A report by Merrill Lynch says that investment banks have increased their speculation on cacao, grain, and sugar by one-fifth in recent months. On their side, food cartels have considerably "hedged" their purchase contracts, contributing to the increase of the derivative bubble. Kellogg, for instance, has hedged 90% of a range of commodities. Anheuser-Bush, the world's largest brewer, has hedged its barley purchases through 2011. General Mills says it is "about 50%" hedged.

Acknowledging that animal feed represents two-thirds of the production price for cattle, and cereals represent half of the feed for poultry and pork, meat prices are expected to rise with the rise in cereals prices. Prices for chicken are expected to begin rising by 10-12% as early as September; pork in October by 10%; and beef, later this coming winter, by 8-10%. Biofuels, which use ethanol from wheat and corn, have already risen by 10% since early July.