Yesterday, the prices of both corn and wheat rose by more than 4%. Corn prices rose by nearly 5%. At the time of writing today, both have continued to rise by nearly another 1%. It is part of the continued rise in global inflation fuelled by the excess liquidity that central banks have pumped into economies over the last year, which has fed out into unproductive consumption, as against the vast oceans of liquidity they have pumped into the global economy over the last thirty years, which was directed into inflating huge asset price bubbles in stock, bond and property markets, so as to protect the fictitious wealth of the global top 0.01%.
Wheat and corn prices rise as all that liquidity, finds its way into monetary demand, as the global economy opens up, after a year of it being artificially, and severely repressed due to the imposition of lockouts and lockdowns by governments across the globe. The rapid increases in economic activity that is being seen, necessarily produces supply bottlenecks and shortages, as for example is most visibly seen with the global shortage of microchips. Similarly, large rises in prices of some raw materials like copper has caused large consumers of copper in China to reduce outputs, as they could not yet pass on the higher costs of inputs into their final product, but as global inflation continues to rise, their own prices will rise, giving them headroom again, to pay the higher prices for their inputs.
One other symptom is the shortage of labour in various sectors. Britain is more badly affected by that because of the idiocy of the Brexit decision. Britain is short of around 70,000 lorry drivers, which hampers the movement of its goods within the country, as well as the further constraints the Brexit imposes on the movement of its goods and people across its borders. It is also short of around 180,000 workers in the pub, restaurant and hotel business, as that opens up, despite the number of pubs and restaurants that have closed as a result of the economic effects of the lockouts over the last year. Again, it is made worse by Brexit, as many of the casual workers in the sector were from the EU, and many of whom have now gone back to the EU. Its hard to avoid some schadenfreude, in seeing the arch-Brexiter, and generally odious Tim Martin of Weatherspoons, now bemoaning the fact that he can't get the cheap labour he needs to produce profits in his pubs, and is appealing to his mate Boris to create a special EU visa scheme to allow EU workers to come to Britain to work in that sector.
Wheat prices, like many other primary product prices have been rising since last Summer. In August last year, Wheat prices stood at around €177 per ton, whereas today, they are at €220, a rise of around 23%. In fact, prices were higher earlier in the year, rising to €257, April. A look at the price movement over the last 20 years, shows the familiar pattern of primary product prices that I have discussed before, in relation to the long wave cycle. The price bottomed in 1999 at $218 per bushel. Then, as the new long wave uptrend began, it rose steadily before spiking in 2007/8 to $1039 per bushel, as global food shortages across the globe erupted, as the long wave expansion saw large rises in the global workforce, and living standards, particularly amongst workers in less developed economies. The 2008 global financial crash, and its impact on the real economy saw prices crash, but by 2010, prices had started to rise again. Only, as with other primary product prices, when new production began to come on stream, in 2014, did prices start to fall.
But prices have been rising globally again since 2016, as the effects of that surge of new supply began to dissipate, and the continued slow expansion of the global economy, and of the global working class, began to stimulate further demand, and a steady rise in prices. This is the same process that Marx describes in Theories of Surplus Value, Chapter 9, in his analysis of the long wave movement of primary product prices, and the effects of long-term, large scale capital investment.
A similar thing can be seen with Corn prices that have risen from $303 per bushel in August last year to $688 today, after a temporary pull back from $760 in May. It shows the same steady rise, from $180, and then spike in prices up to $719, in 2008, with a sharp downturn in 2008/9, followed by a resumption of the rise to $803 in 2012, and then a steep fall to $304 in 2014, as again, all of that investment in new production, and infrastructure, brought new lower cost supplies on to the market. Prices again bottomed in 2016, as the excess from this new supply was worked off, and prices rose modestly, but then have started to rise abruptly since August 2020.
The idea that these price rises are merely "transitory" is not sustainable. The actual rise in prices has been taking place since 2016, as the global economy broke through the attempts to constrain it by austerity measures, and by attempts to drain money into asset markets, and away from the real economy. It has been muted during that time, because of the effects of Brexit in Europe, and Trump's global trade war generally, but the underlying fundamentals have been there for anyone who was looking for them. The effects of lockouts, and the pumping of vast amounts of liquidity into unproductive consumption, has simply pulled the cork that was gradually being pushed by internal pressure, well and truly out of the bottle.
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