Wheat Price Surge Causes Global Reaction
20 December 2007 Wheat for March delivery rose by 2.2%, or 21.5 cents, to $10.01 a bushel. Earlier, it had risen to meet the exchange-imposed daily limit of 30 cents in after-hours electronic trading on the Chicago Board of Trade. As wheat, corn, and soybeans are expected to continue to rally, food prices will increase through 2008. Darin Newsom, a senior analyst at agriculture information company DTN in Omaha, Nebraska, said that wheat could reach $14.50. In France, where prices have climbed 81% this year, rates for March delivery of milling wheat rose 3.4% to US $392.04 per ton.
At the same time, rice has increased to a record high, soybeans reached its highest price in 34 years, and corn to rise to its most expensive in 9 months, while other grain and oilseed prices strengthened. Kellogg Co. and General Mills Inc. have already raised prices, while Kikkoman Corp. – Japan’s biggest maker of soy sauce – plans to increase its price for the first time in 18 years. Sara Lee Corp. has said that it will increase bread prices again, for the second time since September.
In November, China’s food costs rose 18.2%, with inflation at its highest in 11 years. The Chinese government announced that it will eliminate export tax rebates on food commodities such as wheat, in an effort to secure domestic supplies and control rising food prices. Beginning Dec. 20, tax incentives on crop exports such as rice, soybeans, corn, barley, oats, and flour milled from these grains, will be eliminated.
Russia – the world’s fourth-biggest wheat exporter – will cap wheat exports at 12.4 million tons from July. Russia’s Grain Union warns that this threshold could be met as early as January.
While India – last year’s third-biggest wheat importer – recently closed bids for 350,000 tons of the grain to bolster reserves, high prices have caused the world’s second-largest wheat importer, Egypt, to cancel an order for at least 80,000 tons. AWB Ltd., Australia’s largest wheat exporter, says that other customers are cutting back, as well. "Buyers are reluctant to lock in significant tonnage at the current prices as their flour margins are negligible," said AWB, which "expects the international wheat market to remain extremely tight for the first half of 2008."
Get The Newsletter Today!
