Study: Supply and Demand Drive Commodities

From the G-20 interim report:

“It’s very hard to distinguish between financial and structural factors behind the price increases, but it looks like demand and supply are playing the predominant role,” Pier Carlo Padoan, chief economist and deputy-secretary general at the OECD, said in an interview.
A drought and fire in Russia last summer, coupled with export restrictions imposed by the government there, helped bring about soaring wheat prices. Meanwhile, bad harvests in the U.S., Europe, Australia and Argentina have contributed to soaring agricultural commodity prices on international markets.
There have been few investments in agriculture over the past few years and productivity has been stagnant, the OECD report is expected to highlight. At the same time, demand for food has been growing in China and India, the world’s two most populous countries, as their economies continue to grow at a rapid pace.
A similar supply and demand argument can be made for oil prices, Padoan said. Oil prices have recently surged above $100 a barrel amid concerns that the recent turmoil in the oil-rich North African and Middle Eastern countries could hit production. The price of Brent oil, considered the best benchmark, is close to $110 a barrel, 15% higher than at the start of the year.