Commodity prices have shown spectacular increases since the summer of 2007.
Most of the increases were directly or indirectly linked to higher oil prices and increased demand for biofuels.
Oil prices approached $130 per barrel in May 2008, almost double the price a year earlier.
Fertilizer prices caught up with the oil price in-creases of the last several years and almost tripledover the year to May 2008.
Grain prices doubledover the past year.
The run-up in grain prices started in the summer of 2006 when maize pricesjumped, largely as a result of increased use ofmaize for ethanol. In the summer of 2007, wheatprices followed, largely because cropland forwheat had been diverted to feedstock for biofuels(maize and soybeans in the United States, andrapeseed and sunflowers in wheat exporters suchas Argentina, Canada, and Europe).
Rice prices remained low in 2007 compared with other grains.
However, that changed dramatically in the first quarter of 2008, when rice prices almost tripled, partly because of substitution on the demand side between wheat and rice and partly because of policy responses that included export restrictions and import increases to build reserves.
Increases in other commodity prices have been more moderate, and more mixed.
The average price of metals actually declined in late 2007 before rising to new highs in early 2008.
Expressed in dollars, metals prices dropped 15 percent over the second half of 2007, but then jumped almost 30 percent through April 2008, leaving them 10 percent above the levels of a year earlier.
At the same time, currencies of commodity-importing developing countries appreciated 9 percent against the dollar on average over the past 12 months, such that metals prices expressed in local currencies of those countries have basically not changed from a year ago.
And relative to domestic consumption prices, that is, corrected for overall inflation, metals prices declined 7 percent over the previous year.
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