Don't Blame Bernanke: Here's Who's REALLY To Blame For Surging Food Prices

wok chinese food

Photo: Mats Stafseng Einarsen/Wikimedia Commons

Marshall Auerback claims today that Ben Bernanke and the expectation of more quantitative easing are causing the surge in world food prices.He’s wrong.

His argument centres on the flood of money due to the expectation of QE2 and the “financialisation” of commodities due to the Commodities Futures Modernization Act of 2000. He’s correct that the game changed for commodities the minute the legislation passed — 10 years ago. That doesn’t explain the surge this year but it does explain the increased volatility of the last decade.

The move up is helped by the expectation of more liquidity but supply and demand are much bigger factors.

First of all, Corn prices are going through the roof

China exported corn for decades

However China's diet has moved from rice to meat as incomes increase

As China eats more meat, feed and other grain consumption growth is exceeding supplies

Now China and other developing nations are massive importers of corn

This year in particular China's imports have gone through the roof

Despite China's stated goal of grain self-sufficiency, imports are going through the roof.

And corn stocks have fallen to their lowest level since 1997

However the slide in the dollar the last 10 years hasn't helped

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