Between the summers of 2006 and 2008, corn prices more than tripled from roughly 2.50dollar per bushel to nearly $8.00 per bushel. Prices for rice, soybeans, and wheat rose by similar or greater amounts. The exceptionally large and unanticipated rise in prices was attributed to many factors, including: (a) ethanol subsidies, (b) commensurately rising oil prices, (c) unexpectedly large demand growth from China and India, and (d) weather-related factors, such as drought in Australia. While some have argued that the commodity price boom, much like earlier housing and stock market booms, were due to a speculative bubble, it is difficult to reconcile a bubble with an absence of inventory growth. Yet, inventories of all major commodities remained at historically low levels throughout the boom. Recently, prices have fallen precipitously due to a large inward shift in demand stemming from the global economic slowdown.
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