Wheat prices have been going up with the drought in Russia making grain exports no longer allowed. The ban on Russian grain exports removes a major supplier other countries have depended on. This happened because Russia was trying to control domestic prices inside the country and many are worries about a global grain shortage. Central bankers could have a hard time stopping inflation when wheat prices are hurting food costs so much.
Increasing wheat prices continue
Russia banned exports making wheat futures explode to the max amount allowed on the Chicago Board of Trade (CBOT). According to the Associated Press, wheat prices went up 8 percent to $ 7.8575, which is 60 cents higher, Thursday after trade opened. Wheat hasn’t been this high since August 2008. Wheat futures reached a record $ 13.495 in February 2008 when a global food crisis sparked riots around the world. Prices are allowed to rise 60 cents a day but can rise 60 cents an additional day for the CBOT. There hasn’t been a price change such as what happened in June in 51 years.
Drought in Russia makes for dead crops
There hasn’t been a drought this bad in all of Russia in at least 50 years. Since June 9, Chicago wheat prices have gone up 92 percent considering all the things happening like the drought in Russia, Dry weather in Kazakhstan and European Union, as well as flooding in Canada making for ruined crops, reports Bloomberg. Sugar beets, potatoes and corn are all also in danger with the drought. Russian Prime Minister Vladimir Putin told a government meeting in Moscow that halting Russian grain exports would contain domestic prices that gained 19 percent last week, faster than at the peak of the 2008 global food crisis.
Producing wheat predicted to be less
Because there is so much less grain, global wheat productions have gone down a bit. As outlined by the Wall Street Journal, corn futures in Chicago increased 6.2 percent. Rough-rice futures had a 2.7 percent increase. 651 metric tons is where the Good and Agriculture Organization put its estimates for global wheat production in 2010. But the situation doesn’t appear as dire as 2008. In early July, the U.S. government estimated global wheat stockpiles at 187 million metric tons, well above the 124 million tons in storage during the 2007-08 global food crisis. A 23 year high is made when, as estimated, by May 2011 there will be 30 million tons of wheat in just U.S. storage, reports the U.S. Department of Agriculture. 8.3 million tons is where the U.S. low dropped to in 2007-08.
Additional reading
Associated Press
google.com/hostednews/ap/article/ALeqM5hLdQzzkk_vLW3OsMLzbo-eZnRKbAD9HDDAN80
Bloomberg
bloomberg.com/news/2010-08-04/wheat-surges-to-22-month-high-on-russian-drought-corn-soybeans-advance.html
Wall Street Journal
online.wsj.com/article/BT-CO-20100805-716053.html
