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Commodity prices Essay


Rise and fall of stock market prices at U.S. stock exchanges reflect in fluctuation of commodity prices such as rice, wheat, oil and precious metal. Especially in the recent years, crude oil price has been shifting between $80-$100 making it most difficult for oil dependent countries to buy oil from international suppliers.  As per Los Angeles Times, after two decades of low food inflation, the prices of bread, milk and eggs and even flour are on the rise whereas milk price has jumped by 26 per cent and egg prices by 40 per cent.  In household spending, consumers allocate 13 per cent for food and 4 per  cent for gas.  Fluctuation in oil prices in international market are another unhealthy sign for national economy  and signal a warning that oil price must be reduced with immediate effect with the fact that rise in oil price puts more burden on consumers in the form of CO2 emission tax with the growing concern about gas emissions and even extends extreme discomfort in purchasing price  of oil. U.S. economy now in recession period is required to take extreme measures to put stock prices, commodity prices under control  apart from keeping the confidence of

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consumers and investors.

One of the consumers are surprised to spend $4 for baked bread and now prefer to bake own bread at less cost. Last week crude oil quoted $105 per barrel  and is also increasing the demand for alternative fuels such as ethanol and biodiesel.

If it is presumed that due to recession, U.S. dollar is weakening and U.S. dollar being the primary currency in international market for importers and exporters, there is a demand to increase buying prices in order to gain more from exchange of currency and this creates panic in regional suppliers which is why commodity prices are increased putting the burden on the consumers.

As per IMF report as on March 5, 2008, wheat price is $425 per metric tonne, rice is $481 per metric tonne and crude petroleum is $85.00 per barrel. [1]

According to Wall Street Journal  there are many factors that are attributing to the steep rise in commodity prices such as U.S dollar weakening, recession, oil crisis in OPEC nations, export and import of commodities in other parts of  the world viz., Europe, Asia and Africa and  most importantly as Federal Bank interest rise and fall, usually leaves an impact on dollar in the same direction.  The strengthening of U.S dollar is important in all aspects with the fact that U.S.dollar is exchanged with regional currencies whether it is for essential commodities, stock investments or loans.

Therefore, the focus is on U.S.dollar as a  measuring scale for export and import of essential commodities and this must viewed with greater concern by labor department, agricultural department in order to see that paddy products production is improved in order to meet the supply within domestic environment as well to export to other nations which would increase the GDP working to the strengthening of U.S.dollar.  The assessment of U.S. dollar as currency is important in view of export and import of commodities, sensex indices at Stock Exchanges and in the interest of Federal Bank.  It is also important to take note that the excessive weakening of U.S. dollar leaves a steep negative impact on Asian and African countries which are agricultural dependent and oil dependent.


For all purposes, agriculture industry is the first and foremost priority in terms of GDP growth, EXIM business and for keeping the confidence of consumers.


Actual market prices for fuel and non-fuel commodity prices 2005-2008

Accessed March 27, 2008


Commodities lead pull market back

Accessed March 28, 2008


[1] http://www.imf.org/external/np/res/commod/table3.pdf

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