Milk is not often discussed as a star commodity. Yet during the past year it was the standout -- rising 55%. Cheese is trading at a 1984 high.

Food riots are erupting in India and in northern Africa, creating more demand for food. The U.S. Dairy Export Council reported that shipments rose 63% to $3.7 billion, just a tad shy of the all-time record. China bought 353 million kilograms, up from only 69 million kilograms in 2008, as reported in Bloomberg/Businessweek.

There's a catch-22 in world food supply and demand. The demand for food from developing nations is putting pressure on supplies across the globe. But governments are getting increasingly nervous and worried about unrest. To try and preempt civil disturbances, governments have stepped in and are buying food staples. This government buying is driving prices still higher.

Algeria and Saudi Arabia have announced extraordinary purchases of wheat, driving prices to a two and a half year high. Last week Algeria bought 600,000 tons of wheat, much more than usual. Saudi Arabia announced plans to double the size of its wheat stockpile.

When we think corn, we think of the United States. True, the U.S. is the largest producer and exporter of corn. But next comes Argentina, the second largest exporter, and what happens in Argentina affects the price of corn worldwide.

There is an unusual heat wave in Argentina. Corn prices are sensitive to weather changes. The heat wave with temperatures above 90 degrees is causing worry over supplies and prices. On Monday, March corn futures jumped 12 cents per bushel to $6.07 per bushel. Today, corn prices are up another 5 cents.

The next year may bring higher global grain prices. Several factors are coming together to create supply-demand shortages. Let's first look at the demand side.

Globally, the demand for grains, both feed and consumer products, is increasing rapidly. Developing countries are coming out of the recession and their people are demanding more food products. Food prices are rising across the globe. A Wall Street Journal (subscription required) article states that the United Nations Food and Agriculture Organization said its Food Price Index rose 3.7% to 205 -- 44 points in November -- the fifth straight monthly increase. This takes the index to just 8 points below its peak in June 2008.

Reuters quoted Federal Reserve Chairman Ben Bernanke as saying: "We're not in the business of trying to create inflation. Our purpose is to provide additional stimulus to help the economy recover and to avoid potentially additional disinflation, which I think we'll all agree could also be worrisome."

Bernanke claims that inflation is below the Fed's 2% target. That's hogwash! Sure if you use the "core" CPI, which leaves out food and energy, that may be the case. Not to worry.

What is happening in the cattle market is directly affecting food prices at your local supermarket. Here are some upsetting numbers.

• Global meat prices have hit a 20-year high.
• The UN Food & Agriculture Organization's index was the highest in August since 1990.
• Live cattle futures hit $1 per pound, the highest in 22 months.
• Australian lamb prices have risen above $5.50 a kilo, the highest since 1973-74.
• And this is the big whopper: Pork bellies, which are used for bacon, are at a record $1.50 per pound.
• The higher cost of feed is driving up prices.

The U.S. enjoys a sweet spot when it comes to food production. We not only are able to supply our own needs but export are large quantity of grains throughout the world.

India, on the other hand is a net importer of basic food stuffs. As a consequence, India's wholesale food inflation rate has soared to 17.4% in the week ended February 13. This is after a rise of 17.9% the previous week.

Can you guess how many hungry people there are on this planet? Well, this year for the first time the number will be about 1 billion, roughly 1/6 of the world's population. Increasingly, this will put a strain on the food supply chain.

The years 1997-2007 saw a steady rise in agricultural commodity prices with a sharp spike last year. This trend is likely to continue over the next 10 years with prices rising 10-30%.

The Food and Agriculture Organization (FAO) of the United nations is forecasting slightly lower prices this year due to the weakness in the general economy.

In the biggest flim flam ever foisted on the American people, the Commerce Department reported that the CPI rose only 0.1% in May. Now this number is ridiculous because this "core" rate excludes food and energy. If you have been gassing up your car lately, you know that gas is now pushing $3.00 per gallon.

Nevertheless, the government says "not to worry about inflation." Well if you look more closely you'll find that gas prices actually rose 3.5% in May with crude oil prices trading near $72.00 per barrel.

This post is part of AOL Money & Finance's Best & Worst in Money 2008 feature.

Consumers took it in the chin so many times this year, it's surprising many of us are still standing. Consumer credit for student loans, mortgages, car loans and just about everything else dried up completely by October. Oil prices soared, drained our pocketbooks, and then dropped like a stone after doing the damage. Food prices continue to soar as the prices for our homes and the value of our retirement funds plummet. So how does one decide, which is the most disturbing consumer trend? Let's look at our top four picks, presented in alphabetical order.

Americans with good credit struggling to get loans at favorable rates
While rates are starting to come down thanks to the latest bailout by the Fed, good deals are hard to find. Most banks are hoarding their cash and only lending it out to those with credit scores over 760. Even then, rates are not that favorable. You can only think about applying for a mortgage or equity line if you have at least 90 percent equity in a home that has probably lost value and, in most cases, you must have 80 percent equity to get a home loan. How can the U.S. stop the downward spiral in home values until credit is available for qualified buyers?

You might think that since consumer prices have tumbled by near record percentages that this might lead to lower food prices. But much of that consumer price decline is attributable to lower energy prices -- after all oil peaked at $147 a barrel in July only to fall 63.5% to $53.63 yesterday.

Why won't food prices follow oil down? Many food producers panicked as corn and wheat prices peaked this summer -- locking in long term supply contracts at top prices. For instance, corn, which usually trades at $2 or $3 a bushel, pealed at $8 a bushel in June.

Although prices have since dropped to $3.50 a bushel, some food manufacturers locked in prices for corn and other commodities in the spring and summer, fearing that prices could go even higher. The result is that producers will pass on those higher costs in the form of food prices going up 7% to 9% in 2009.

A basket of 16 basic food items costs $48.68, up 10.5% from a year ago, the American Farm Bureau Federation said in a press release that marketwatch.com covered on Friday.

Economist David H. Wang told BloggingStocks Friday many factors are driving grocery prices higher, including higher ingredient costs, higher energy prices, and rising demand for food in developing countries around the world (especially China, India, Russia, Brazil, and the Middle East).

A few grocery store tips:

Wang says that while there are many savvy shoppers in the states, many others are new to shopping. Wang, who worked in a grocery for three years while in college, offered his tips on how to lower your grocery bill:

• Stick to a shopping list and shun 'impulse' buys: Wang says this is perhaps the biggest money saver. "From the moment you walk in the store, grocery stores are designed to get you to buy more items than you plan to buy," Wang said. "You are bombarded with stimuli that tempts you to spend, and it works, so stick to your list. If it's not on the list, ask yourself if you need the item, or are buying merely on impulse."

• Coupon card: Most grocery chains offer a coupon card that automatically deducts for items on sale. Sign up for one and use it. But evaluate the coupons some cash registers dispense with a sales receipt. "Ask yourself if you need it or if it is on your list," Wang said.
  

• Evaluate buying in bulk. "Buying larger sizes usually lowers cost per food purchased but ask yourself if you will need and use the item," Wang said. "If the item is not your list, don't buy it, as you could be succumbing to an impulse buy, which will drive your food bill up."

There is an often-repeated joke in economists' circles that goes: Inflation is low, if you exclude food and energy prices. And of course, no one buys food or energy . . .

The above is a critique of the U.S. Federal Reserve's use of core inflation -- which excludes food and energy prices -- as a measure of lasting price changes in the U.S. economy.

Critics charge, "inflation is the sum of all products / services consumers use, not solely a portion." In essence, they argue that the Fed is underestimating inflation, creating a distorted picture of price conditions people face daily.

Still, a new research report by Michael Kiley, a Federal Reserve economist, supports the Fed's continued use of the core inflation metric. In Estimating the common trend rate of inflation for consumer prices and consumer prices excluding food and energy prices, Kiley's research reinforces the theory that total inflation historically contains more temporary changes in prices -- i.e. changes that could disappear -- than core inflation, thus supporting the continued use of core inflation.

In other words, core inflation is used by the Fed because it has been deemed a more-accurate predictor of long-term price changes or 'inflation over time' than total inflation, sometimes also referred to as 'headline inflation.'

Economist David H. Wang said he's by-and-large in agreement with Kiley's conclusions. "Core inflation is more indicative of long-term price changes. The problem occurs when you have periods of large price changes in food and energy, such as today, which pushes total inflation way up. Then the cry occurs that the Fed is not measuring inflation accurately," Wang said.

The reduction in global economic growth and growth expectations is leading to one benefit: a sharp decline in commodity prices, creating hope inflation may be peaking in many parts of the world, The Wall Street Journal reported Monday (subscription required).

Rice and palm oil, two commodities critical for the developing world, are both down about 40% since May, while the world's most vital commodity, crude oil, is down abut 23%, The Journal reported.

An end to surging commodity prices?

Economist Glen Langan told BloggingStocks Monday that while the commodity price-lower trend is still young, continued commodity price declines would be a welcomed sight, provided they don't drop too much.

"The pullback is welcome because many commodities had reached prohibitive levels, hindering commerce and really hurting the modest budgets of the poor/working poor in developing countries," Langan said. "However, too much of a price slide in commodities would be a sign of a pronounced global economic slowdown, which is something we don't want."

Further, Langan said that while regulators in various nations probe 'speculator' activity and alleged price manipulation in commodity markets, he argues that many of the price rises are consistent with historical price booms in other asset classes / sectors.

Europe's economy contracted in Q2 for the first time since the euro was launched more than 10 years ago, as exports underperformed and energy costs cut into consumers' disposable income, Eurostat, the European Union's statistics office announced (PDF) Thursday.

Euro-zone Q2 GDP fell 0.2% and EU27 Q2 GDP -- which includes nations in the European Union but not formally a part of the euro currency system -- fell 0.1%, Eurostat said. In Q1, Euro-zone GDP rose 0.7%.

Further, on a year-over-year basis, euro-zone GDP increased 1.5%, with inflation running at about 4.0%, well above the European Central Bank's 2.0% annual limit.

Economist: 'Bad news for global economy'

Economist David H. Wang told BloggingStocks Thursday Europe's slowing economy "is bad news for the global economy."

"This is bad news because we need European growth to prevent a global economic slowing. But the economies in two major European economies are clearly slowing. Germany's GDP fell 0.5% in the first quarter, and France's fell 0.3% in the second quarter, so given their make-up in the euro-zone, Europe has experienced a pronounced slowing," Wang said.