Last update : 28.10.2010
High prices on agricultural commodity markets: Situation and prospects
European Commission, DG Agriculture
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The paper responds to concerns about causes and prospects of high agricultural commodity prices which started increasing in 2006/2007 and soared in early spring 2008, and thus focuses on agricultural commodities utilised mostly as food. It takes stock of and elaborates existing analysis within the DG AGRI and elsewhere of causes of high prices on agricultural commodity markets, and prospects for their developments. Price volatility has always been present and hikes in the prices occurred before the current one. Reasons for current price pressures are unambiguous and have been reiterated on multiple occasions: a combination of steadily increasing demand and lagging supply or production shortfall, exacerbated by short-term economic and policy factors. These factors are both of structural and cyclical nature. However, the contribution and combination of these factors varies between sectors. For example, high wheat prices are for the large part attributable to supply constrained by weather conditions while demand elements play a more important role in the oilseeds sector and maize. Although price fluctuation is characteristic for products exhibiting seasonality, for some commodities recent hikes exceeded levels explained by accepted market fundamentals. The Commission communication on high prices sets out key areas for action in three categories – efforts to mitigate the short to medium term impact of price rises, initiatives to increase supply in the longer term, and addressing the crisis at international level.
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