18 February 2008

Keep an eye on the price of wheat and bread

This graph scares me. I found it today in TwinCities.com, in a report about the agricultural markets. Here are some selections from the text of the article:

Decades from now, farmers will still talk about this week - the moment when wheat in Minneapolis soared to nearly $20 a bushel. Like a 100-year flood, spring wheat prices have risen relentlessly all winter, obliterating every record in sight. At the Minneapolis Grain Exchange, wheat fever pushed prices to $19.80 a bushel in trading Friday - nearly triple the record from 1996.... For the past month, the hottest market in the nation has been the Minneapolis Grain Exchange, the nation's center for trading spring wheat futures. The high-protein wheat that farmers grow in Minnesota and the Dakotas is prized for making bread, but poor crops worldwide have left wheat supplies at a 60-year low.

The impact of that shortage reaches far beyond the wheat trading pit in Minneapolis. Trading in Minneapolis has supercharged wheat markets in Chicago and Kansas City, Mo., as well. That has pushed corn and soybean prices to near-record levels - fueling a wave of uncertainty about everything from food price inflation to subsidies in the new farm bill to hunger in the developing world....

"It's telling us how close we are to that tipping point in all commodities," said Usset, a former grain trader. "Every commodity I know would like more acres: corn needs more, soybeans need more ... durum wheat, malt barley, sunflowers, they all want a little more production."
I remember seeing a link earlier this week about a baker complaining that the price he was paying for wheat was skyrocketing, and he couldn't absorb the change and would have to pass it along to consumers. There are probably many reasons for this including temporary weather and crop problems, but also recent shifts in cropland from wheat to corn production to supply ethanol for fuel, and perhaps most importantly a growing worldwide demand for wheat- the latter accentuated by the plunging value of the dollar versus worldwide currencies making our grains and other products more attractive to overseas buyers.

One writer in the Financial Times (London) has suggested this past week that the next crisis will be over food. I don't think that concept (or this wheat graph) has made it to the "mainstream media" (making it one of the Things You Wouldn't Know If We Didn't Blog It). But I'll bet the impact of the graph embedded above shows up at grocery stores before spring. Wish there were some way to stock up on doughnuts.....

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