By *SCOTT KILMAN*
September 28, 2007; Page A1, Wall Street Journal
Rising prices and surging demand for the crops that supply half of the
world’s calories are producing the biggest changes in global food
markets in 30 years, altering the economic landscape for everyone from
consumers and farmers to corporate giants and the world’s poor.
“The days of cheap grain are gone,” says Dan Basse, president of
AgResource Co., a Chicago commodity forecasting concern.
This year the prices of Illinois corn and soybeans are up 40% and 75%,
respectively, from a year ago. Kansas wheat is up 70% or more. And a
growing number of economists and agribusiness executives think the
run-ups could last as long as a decade, raising the cost of all kinds of
food.
In the past, such increases have been caused by temporary supply
disruptions. Following a poor harvest, farmers would rush to capitalize
on higher crop prices by planting more of that crop the next season,
sending prices back down. But the current rally, which started a year
ago in the corn-futures trading pit at the Chicago Board of Trade, is
different.
What’s changed is that powerful new sources of demand are emerging. In
addition to U.S. government incentives that encourage businesses to turn
corn and soybeans into motor fuel has affected the supply of corn and soybeans for animal feed, and the growing economies of Asia and Latin America are enabling hundreds of millions of people to spend more on food, especially meat and milk.
1) How does the U.S government incentives to turn corn and soybeans into motor fuel affect the price of beef? Explain
2) How do the growing economies of Asia and Latin America affect the price of corn and soybeans? Explain
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