The prices of a tank of gasoline, a loaf of bread and a gold coin are likely to rise in the coming weeks.
The trend really began last year when weather events hit critical grain-growing regions. The drought and fires in the Black Sea area of Russia and the Ukraine led both countries to stop exporting wheat and other cereals, pushing up the prices of those commodities. The devastating floods in Pakistan and Australia also played a role, putting pressure on suppliers in the United States, Canada and other major growing nations.
Now, oil has come into play. Some of the blame for the unrest in Tunisia, Egypt, Libya and other Middle Eastern nations undoubtedly lies with the rise in food prices; Egypt is the world's single largest importer of grain, and millions of Egyptians rely on government-subsidized bread to survive.
Crude oil futures are rising to levels not seen since shortly before the financial crisis of 2008 brought the global economy to its knees. West Texas Intermediate light, sweet crude oil futures for April delivery climbed briefly to above $103 per barrel before slipping to $96.10 per barrel.
April Brent crude futures – which more closely track European supply and demand and are thus more sensitive to the revolution in Libya – spiked to $119 per barrel before slumping to $110.20.
Meanwhile, gold is up over 8 percent since its recent low of $1,308 per troy ounce in January.
"Gold prices rallied in the aftermath of the Iranian hostage crisis in 1979, the Soviet invasion of Afghanistan and at the beginning of both Gulf wars," James Steel, a precious metals strategist at HSBC, told the Financial Times. "The geopolitical risk component of market risk is again on the rise due to political dislocation in the Middle East and North Africa."
The three trends are interrelated and interdependent. Food production isn't keeping up with global growth, both in raw population and total consumption, and the recent severe weather events haven't helped that situation any. In addition, rising fuel prices impact every major agribusiness, a serious concern in today's increasingly industrialized agricultural sector. Precious metals rise off of the general nervousness on display, and speculative investors jump in as volatility increases.
The United States Department of Agriculture is warning that 2011 will be a year with sustained high prices for agricultural goods.
"While it is often said that the cure for high prices is high prices, even with additional supplies expected this year, it is likely that the tight stocks-to-use situation will not be entirely mitigated over the course of one or even two growing seasons," said Joseph Glauber, the USDA's chief economist, at the USDA Outlook Forum in Washington, DC.
The federal agency forecast that the average price for corn in 2011 will be $5.60 per bushel; for wheat, $7.50 per bushel; and for soybeans, $13 per bushel.
THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.
THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.
TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.
YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.
GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.