By Yali N’Diaye

WASHINGTON (MNI) – As the rise in world food prices continues to
raise inflation, humanitarian and in some places political stability
concerns, the U.S. Commodity Futures Trading Commission remains silent
on whether market manipulation could be at play.

“The Commission neither confirms nor denies the existence of any
investigation,” a spokesman told MNI Wednesday.

U.S. wholesale prices rose 1.6% in February, the Labor Department
reported earlier, boosted once again by energy and food.

Consumer foods prices rose 3.9% in February, the largest increase
since a 4.2% surge in November 1974.

About 70% of the increase can be attributed to prices for fresh and
dry vegetables, up 48.7%. Higher prices for dairy and meats also fueled
the increase, up 4.1% and 3.4% respectively.

The United Nations Food and Agriculture Organization anticipates
that “food prices will likely remain volatile,” after its food prince
index rose 3.4% in January.

“While pass-through to the CPI has been slow to-date, this suggests
some further upward pressure on food prices at the consumer level in the
coming months,” Barclays Capital analysts said in a note following the
PPI release. The increase in the headline index — which includes food
and energy — topped analysts expectations ranging from +0.3% to +1.1%,
with a consensus at +0.7%.

“All in all, this was a very strong report, providing clear
indications that recent gains in oil and commodity prices are beginning
to feed through the production line and put upward pressure on a range
of goods beyond energy and food,” they added.

“We have to be mindful about pass-through to the CPI of higher food
prices in the PPI,” agreed Credit Suisse economists.

Goldman Sachs analysts, however, were more upbeat, suggesting
prices could even reverse their course in a few months.

“The commodity price increases that underlie these increases,
however, have recently eased,” they noted. “For example, the S&P GSCI
Agriculture & Livestock Index has fallen by around 10% since mid
February.”

“Therefore,” Goldman Sachs concluded, “headline producer prices are
unlikely to continue increasing at this pace, and could reverse some of
their gains a few months down the road.”

Thursday’s consumer price index data will tell how much of a
pass-through occurred. The report is scheduled to be released at 8:30 am
ET. Analysts expect the headline CPI to rise 0.4% in February, with
forecasts ranging from +0.3% to +0.5%.

The Federal Reserve Open Market Committee acknowledged in its
statement Wednesday that “The recent increases in the prices of energy
and other commodities are currently putting upward pressure on
inflation.”

However, “The Committee expects these effects to be transitory.”

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MAUDS$,M$$DR$]