Wheat prices skyrocketed to their highest level in two years on the news that Russia will ban all grain exports because of a severe drought. Russia exports a ton of grain to many countries who rely on it coming in. The ban, an attempt to control domestic prices in Russia, raises concerns about a global grain shortage. Central bankers could have a hard time stopping inflation when wheat prices are hurting food costs so much.
Wheat prices still going up
Russia banned exports making wheat futures explode to the max amount allowed on the Chicago Board of Trade (CBOT). As outlined by the Associated Press, wheat prices went up 8 percent to $ 7.8575, which is 60 cents higher, Thursday after trade opened. Since August 2008, this is the highest wheat has been. 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 another day for the CBOT. There hasn’t been a price change like what happened in June in 51 years.
Crops shrivel from drought
In 50 years, Russia hasn’t seen a drought this bad. Since June 9, Chicago wheat prices have gone up 92 percent considering all the things happening such as the drought in Russia, Dry weather in Kazakhstan and European Union, as well as flooding in Canada making for ruined crops, reports Bloomberg. Russia’s drought is now threatening seeding for winter grain and damaging other crops including sugar beets, potatoes and corn. Russia seems to be doing better than they did in the 2008 global food crisis because stopping exports has helped domestic prices 19 percent in just the last week, which is why Russian prime minister Vladimir Putin said they have done it.
Less global wheat production
Because there is so much less grain, global wheat productions have gone down a bit. There was a 6.2 increase in corn futures in Chicago, reports the Wall Street Journal. Rough-rice futures rose 2.7 percent. The Food and Agriculture Organization cut its 2010 global wheat production forecast to 651 million metric tons. It isn’t really nearly as bad as it was in 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 could be 30 million tons of wheat in just U.S. storage, reports the U.S. Department of Agriculture. In the 2007-08 crisis, an all time low was hit with 8.3 million tons in inventories in the U.S..
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
