By MARK WHITEHOUSE, SCOTT KILMAN and ALEX FRANGOS
CASSAVANEWS to follow up The Wall Street Journal. Another commodity that has shot up this year is cassava. In China, the tuberous root -- also known as tapioca -- is used in the growing production of industrial alcohols and ethanol. Cassava is also used to feed ducks and pigs and make tapioca balls for bubble teas. A bug infestation has dampened the harvest in Thailand, a key producer. Cassava prices are up about 59% over the past year, according to the United Nations.
From corn to crude, prices for a wide range of commodities are on the rise across the globe, a trend that underscores -- but could also hinder -- a gathering economic recovery.
In recent months, global food prices have been growing at a rate that rivals some of the wildest months of 2008, when food riots erupted across the developing world. Higher prices could be a positive sign that companies are gearing up for a rebound in consumer spending, or the harbinger of a return to the upward spiral that plagued consumers before the recession took hold.
The surge in commodities "is a reflection of extremely strong demand in the emerging world, and growing hopes of stronger demand in the developed world," said Jim O'Neill, head of global economic research at Goldman Sachs in London. It is "encouraging so long as it isn't too persistent."
But Hugh Grant, chairman and chief executive of St. Louis crop-biotechnology company Monsanto Co., said the recession merely "masked" the 2008 food crisis.
The price of a bushel of corn -- a ubiquitous ingredient in the U.S. diet -- rose 24% since Sept. 1. In Thailand, the price of a metric ton of rice, a staple across the region, stood at $618 in December, up 11% from September, but well below a peak of about $1,000 in April 2008. An index of global food prices compiled by the United Nations jumped 6.9% in November alone from the month before.
Other commodities are surging, too. The price of a barrel of oil this week broke out of the $60 to $80 range it had maintained for the latter half of 2009, trading at $81.37 on the IntercontinentalExchange Friday, up about 20% from Sept. 1. In London, the price of gold stood at $1,137 up about 18%.
To be sure, prices of most commodities, with the exception of gold, are well off 2008 peaks. The UN's food-price index is 21% lower than its June 2008 high. The price of oil peaked at just more than $146 a barrel in July 2008.
Also, the fundamentals of the global grain markets are a lot different now than during the 2008 food crisis, when prices of crops such as corn, soybeans and rice more than doubled. That surge was largely the result of the world having consumed more grain than it had produced for much of the decade, which drained reserves to unusually low levels.
But rising commodity prices, in part, illustrate concerns that central bankers' easy-money policies, aimed at rescuing the economy, will fuel inflation. "Inflation expectations are creeping up," said Spyros Andreopoulos, global economist at Morgan Stanley in London.
Both actual price rises and fears of future inflation threaten to put central bankers around the world in a tough spot. On one hand, many want to keep interest rates low longer to support the recovery. But the need to keep prices in check could force them to hit the brakes sooner.
Food prices are a big concern in developing countries such as China and India, where food makes up a larger portion of consumer purchases. On Thursday, China's central bank raised a key interest rate in a shift toward a policy of managing inflation. Economists say the Reserve Bank of India could raise interest rates as early as this month.
In the U.S., with unemployment at 10% and companies operating below capacity, economists doubt the commodity boom could spark a traditional inflationary spiral, in which rising prices and wages reinforce one another. And while officials at the Federal Reserve have expressed concern about rising prices, for the most part they believe high unemployment will be a counterweight.
Still, as higher commodity prices work their way through the production chain, they could damp any recovery by forcing consumers to spend more on essentials such as food and gasoline. They are also a concern for a range of industries, such as airlines and food processors, where rising input prices could eat into profit.
"Everybody is nervous," said Ronald Lucchesi, president of the frozen-products division of Gonnella Baking Co., a closely held Chicago firm that was battered by soaring wheat costs in 2008.
Greg Carlson, a hog farmer with 400 sows near Stratford, Iowa, said he was losing money on every pig he produces as meat prices fail to keep pace with the cost of feed. "There are a lot of companies that are right on the edge -- and we're one of them," he said.
Economists say the U.S. livestock industry faces a brutal shakeout if it isn't able to pass along its higher feeding costs. "The consumer has to get used to paying higher prices," said Robert "Bo" Manly, executive vice president and chief financial officer of meat giant Smithfield Foods Inc.
The surge in commodity prices is having an impact around the world, particularly in the developing nations that account for an increasing share of global growth. India is perhaps the most exposed, due to its poor rainy season and resultant subpar rice crop. Rapid rises in the cost of rice, tea, sugar and milk have pushed food prices up 17% in the year ended November, contributing to overall consumer-price inflation of about 5%.
Another commodity that has shot up this year is cassava. In China, the tuberous root -- also known as tapioca -- is used in the growing production of industrial alcohols and ethanol. Cassava is also used to feed ducks and pigs and make tapioca balls for bubble teas. A bug infestation has dampened the harvest in Thailand, a key producer. Cassava prices are up about 59% over the past year, according to the United Nations.
—Lauren Etter contributed to this article.
Write to Mark Whitehouse at firstname.lastname@example.org, Scott Kilman at email@example.com and Alex Frangos at firstname.lastname@example.org