Food Costs Could Crimp Global Growth

The global market's recovery from the Asia-led swoon faces a challenge that's not on most investors' radar screens -- but is on their dinner plates.

Over the past year, the price of corn has doubled, grain prices have surged 70%, soybean prices have risen 27%, and inflation in confectionary materials is running at a 12-year high, up nearly 10%. In addition, the price of animal feed has gone up by 18%, and after falling most of last year, fertilizer has inched back up 5% in the past three months.

The massive price surges have resulted in the cost of global finished consumer foods rising 10% in the last year and baked goods gaining in nine out the past 10 months. These latent inflationary pressures may be more significant than many realize, some say.

"Markets have got so excited recently over U.S. inflationary figures, but we have to be concerned about using one set of figures for the global economy," says Justin Urquhart-Stewart, a director of global investor Seven Investment Management in London. "It's not a sensible method of running any investment plan."

The concerns over exported inflationary pressures generally and the recent drive in food prices specifically is important because it suggests that the attitude of the Federal Reserve last Wednesday about inflation may have been too casual, say market commentators, particularly those in the U.K. and Asia.