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Wheat, Cotton, Sugar, Rubber: Why Commodity Prices Are Skyrocketing

A French analysis of global commodity prices, as 2010 quietly finishes with record highs

Corn has reached record highs

PARIS - Wheat, corn, coffee, sugar, rubber, cocoa, cotton, soy, rice. Each one of these commodities has seen their prices skyrocket this year, some to all-time record highs. The increase accelerated in December, with investors buying with the fever of those who fear shortages, or a more deliberate desire to hunker down for an austere 2011 protected by the guarantee of staple goods.

On the Chicago market Tuesday, cotton to be delivered in March hit a record high at $1.59 a pound. Its price has more than doubled since January, the biggest increase since 1973. The same day, sugar to be delivered around the same time hit prices not seen in almost 30 years, at 33.65 cents a pound, a 52% increase over the year. Arabica coffee went from $1.35 a pound in May to $2.20, hitting a 13-year-high. The day before, rubber blew all records at 411,40 yens a kilogram on the Tokyo market, a 60% increase.

In Paris, wheat for January is selling just under its all-time record (261 euros a ton in 2008), having shot up 70% since January. Corn prices increased by 46% and soy by 28%. The most obvious reason: weather. Too much rain or not enough. There where also some assaults on the market, especially this summer on cocoa, when the British hedge fund Armajaro went as far as owning 7% of the world production.

Semester Contrast

After this summer's drought in Russia and its consequences on the price of wheat, the new climatic phenomenon threatening commodity prices is the La Nina. It influences the temperature of the Pacific Ocean and often triggers heavy rains in South East Asia and Australia, and droughts in South America. Heavy rains recently damaged the wheat crop in Eastern Australia. Same thing for sugar and rubber. And if abnormal rains are brought into the mix, as in Pakistan and India, then a wide variety of crops are damaged.

But more broadly, the fundamental reasons for the price increases remain the same: a lackluster production incapable of satisfying a constantly growing demand, led by China. The country's growth is 4 times that of Europe. It tried to halt the rise in commodity prices, but the measures that were taken had only a limited effect.

"What is incredible is the contrast in the grain market between the first and second semesters of 2010," says Emmanuel Jayet, director of research on commodities at French bank Societe Generale. "During the first six months, crop estimates were very positive. They were on a downward trend even though prices were high. Record lows in 2010 for corn, wheat and soy were 50 % higher than the 2005 average."

But with the drought, Russia reduced its production estimates by 30%, strongly affecting supply since Russia is one of the world's top producers. Then the US had to revise its predictions, as Australia eventually did as well. "The lesson from 2010 for grains is that the worst can happen," says Jayet.

This upward trend will probably last through 2011. The drought in Argentina could have a major impact on corn, wheat and soy crops. As for the prospects of sugar, it is hard to predict price movement so long as the Indian government continues to withhold information on its forecasted exports.

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food / travel

Pasta v. Fascists: How Italy's Staple Dish Became A Symbol Of Resistance

Pasta may not be considered controversial today, but it played an important role during Italy's fascist years, particularly in one family's celebration of community and liberation.

Photo of the Cervi family.

Photo of the Cervi family, whose seven children were shot by the Fascists on December 28, 1943, at the Reggio Emilia shooting range.

@comunisti_alla_ribalta via Instagram
Jacopo Fontaneto

ROME — Eighty years ago — on July 25, 1943 — the vote of no confidence by the Grand Council of Fascism, leading to Benito Mussolini's arrest, set off widespread celebrations. In Campegine, a small village in the Emilian province, the Cervi family celebrated in their own way: they brought 380 kilograms of pasta in milk cans to the town square and offered it to all the inhabitants of the village.

The pasta was strictly plain: macaroni dressed with butter and cheese, seen as more of a "festive dish" in that period of deprivation. As soon as the Cervi brothers learned about the arrest of Mussolini, they procured flour, borrowed butter and cheese from the dairy, and prepared kilos and kilos of pasta. They then loaded it onto a cart to distribute it to their fellow villagers. Pastasciutta (dry pasta) specifically regards dishes with noodles that are plated "dry", not in broth. That would disqualify soup, risotto, ravioli...

Even though pastasciutta is the most stereotypical type of pasta today, it had a complicated relationship with the government during Italy's fascist years.

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