Monetary policy not driving high ag commodity prices

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A steep climb in agricultural commodities in the past year has been driven by supply and demand factors, not monetary policy, the U.S. government's chief economist said Tuesday.

Prices for a variety of commodities, from corn to livestock, have risen sharply in the past year, stoking fears of food inflation in the U.S. and around the world. Critics of the Federal Reserve's monetary policy have said its bond-buying program, known as quantitative easing, has helped drive those gains, sending investors into risky assets such as equities and commodities.

U.S. Department of Agriculture Chief Economist Joe Glauber said he's seen several studies on the influence of monetary policy, including quantitative easing, but that "I don't think I've seen convincing evidence that it's had much impact.

"I think there are a lot of fundamentals in these markets than can explain why prices have been so high," he told reporters at a conference at the Kansas City Federal Reserve on agriculture.

Grain prices started to soar last summer, after a severe Russian drought decimated the wheat crop there. Concerns have since spread to other markets such as corn, which has doubled in price during the past year amid relentless global demand and disappointing crops.

Those increases have drove the cost of livestock production, sending cattle and hogs prices higher as well.

Glauber said monetary policy does have some impact on the market, and that a weaker dollar has helped drive export demand for U.S. products.

He added that an increase in the Fed's core interest rate would hurt U.S. farmland values, which have soared roughly 20% in many areas in the past year, but that he doesn't see a "large crash" in prices.



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