Is demand from China really driving commodity prices?

That was the question that GROWMARK economic and market research manager Kel Kelly set out to answer in a recent research report.

“Overall the report concludes that China does not have the dominant impact on commodity prices that everyone thinks they do,” said Kelly in an AgWired interview. “The primary reason for this is that China simply does not buy enough of our agricultural commodities to have that much impact on price.”

Kelly says that while China’s population is indeed growing rapidly, “China produces the majority of what they consume.”

So, what has been driving commodity prices higher in the last decade? “That is simply massive amounts of money that were originated on Wall Street and injected into the commodity markets,” said Kelly. “That’s what pushing up the prices of all commodities since the early 2000s, including ones that China does not buy.”

Kelly adds that the same reasoning applies to those who want to blame ethanol production for rising commodity prices, that it is not physical demand driving higher prices, but instead is monetary demand from Wall Street.

Click here to read the entire report and listen to Kelly explain some of the major points in this interview: Interview with GROWMARK economist Kel Kelly