Soft commodity prices soar

The prices of many soft commodities have risen sharply over the past five years, figures from Clerical Medical show.

Since April 2002, soya oil has risen 109%, Brazilian coffee 104%, palm oil 81%, corn 79%, raw sugar 58%, and wheat 58%. In comparison the price of gold has risen 119% and crude oil has risen 150%.

Tim Crawford, group economist at Clerical Medical, said: "Soft commodities – wheat, corn, grain, sugar, palm oil and soya – have surged in value over the past few years. History suggests commodity prices rise sharply when the world economy grows faster than average and inflation is rising.

"Two factors are driving growth: rising living standards around the world leading to greater demand for food, and demand for biofuels. Governments in the US, UK and Europe are encouraging the use of alternative energy to reduce carbon dioxide emissions from vehicles.

"Developing nations are consuming more meat as their populations become richer. In China, for example, meat consumption has risen dramatically over the past few years; as it takes several kilograms of foodstuffs to produce one kilogram of meat, it is easy to understand why demand is rising.

"Global reserves of grain are falling; more is being consumed than produced and new land is being cultivated only slowly. Added to this, drought in some key producing nations has hampered supply."