Scientific American Predicts Boost to Energy and Food Prices

The Scientific American has a well reasoned argument for the potential rise in commodity prices - using some basic economic supply and demand theory,

Their economists have this to say:

The latest disaster is unfolding in Australia, where the northeastern state of Queensland has been inundated after a month of rain, and is proving every bit the catalyst for rising commodity prices as the 2010 floods in Pakistan and the wildfires in Russia were. Flooding in Australia has roiled Asia-Pacific markets for coal, cotton, wheat and sugar.

IHS Global Insight predicted yesterday that the floods would trim at least two-tenths of a percent off of Australia's projected 2011 gross domestic product. Queensland is the largest exporter of coal for making steel. Nearly all of the mines are closed, and seaborne coal prices are approaching record highs.

The biggest jolt to world commodity prices probably hasn't hit yet, said IHS economist Bree Neff.

"They've pushed out most of the stockpiles," she said, referring to coal, grain and sugar stored at the coastal ports. The rest is trapped inland, where the floods have held up rail deliveries. "In the next few weeks, we'll see a lot more disruptions to prices."

Read the rest of the article at Scientific American.