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Soft Commodity Costs 'Have Gone Up'

16:36 Mon 24th May 2010 |

Most of us have noticed that the cost of our shopping has been steadily rising over the last few years. This is due to the price of so called ‘Soft Commodities’. These are everyday things such as wheat, sugar or even orange juice.

According to recent research over the past few years the prices of these commodities have gone up significantly. Clerical Medical, specialists in pensions and investments, have recently revealed the figures that prices for some of our most basic food stuffs have risenl; for example the cost of corn has gone up by nearly 80%, sugar has gone up by over 50%.

Other rises noted were for wheat which has also gone up by over 50%, while the value of soya oil has doubled.

"Soft commodities - wheat, corn, grain, sugar, palm oil and soya - have surged in value over the past few years," said a group economist at Clerical Medical.
"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."

In the wake of this, people could now be paying more when it comes to their weekly shop, meaning some may find it difficult to keep up with monthly debt repayments or utility bills. 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.

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.

Research from Sainsbury's Bank has found that the average householder spends more than £11,000 per annum in order to maintain a home. This could also be set to rise if the prices keep increasing.

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