Since Russia plans to ban all grain exports because of a drought happening, wheat prices have gone up considerably. The ban on Russian grain exports removes a major supplier other countries have depended on. A global grain shortage is the concern of most people as Russia tries to control domestic prices inside their country. Surging wheat prices and their impact on food costs may challenge central bankers fighting to hold back inflation in their efforts to nurture a global economic recovery.
Rising wheat prices continue
Wheat futures soared to the maximum amount allowed on the Chicago Board of Trade (CBOT) after Russia banned grain exports for the rest of the year. Trade opened Thursday and wheat went up 60 cents to $ 7.8575, which is an 8 percent leap, reports the Associated Press. It’s the highest wheat price 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 one more day for the CBOT. The price of wheat has soared since early June, and notched its biggest monthly gain in July in at least 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. As outlined by Bloomberg, what is affecting the wheat market as much as bringing Chicago wheat prices up 92 percent since June 9, are all the disasters ruining crops such as flooding in Canada, the drought in Russia, and weather being so dry in Kazakhstan and also the European union. 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.
Less global wheat production
Because there is so much less grain, global wheat productions have gone down a bit. The Wall Street Journal reports that September corn futures in Chicago rose 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. 2008’s situation is still much worst. 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. The U.S. Department of Agriculture hopes to have a 23 year high in the making by having 30 million tons stored within the U.S. alone by the end of May 2011. Within the 2007-08 crisis, an all time low was hit with 8.3 million tons in inventories within the U.S..
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
