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Wheat volatility leads to surge in global food prices, finds FAO

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By Jane Byrne , 01-Sep-2010

The FAO has revised downward its forecast for 2010 world wheat production levels and reports that wheat market dynamics drove international food prices up in August by 5 per cent – the biggest month-on-month increase since November 2009.

The latest revision in wheat production forecasts reflects a further cut in the estimates for this year’s harvest in the Russian Federation from 48 to 43 million tonnes (mt) in August, stated the UN’s Food and Agriculture Organisation (FAO), in its latest update on the global cereals supply and demand situation.

The international organisation said that the surge in its Food Price Index (FFPI), which is measure of the monthly change in international prices of a basket of food commodities, was informed by the sudden sharp rise in international wheat prices following drought in the Russian Federation and the country’s subsequent restrictions on wheat sales.

“But other drivers included higher sugar and oilseed prices,” noted the FAO report.

Comparative analysis

But the international organisation cautions that the FAO Food Price Index (FFPI), though it peaked last month to an average of 176 points, is still 38 per cent down from the highs of June 2008. More

Wheat, the Staff of life, now a guarded commodity.

4 Comments

 

Paul Griepentrog (c)copyright 2010 All Rights Reserved

With high temperatures and drought affecting Russia and Western Europe the Russian government has announced a halt to all wheat exports and has placed additional security at storage facilities.  Russia, the third largest wheat exporter in the world has asked Belarus and Kazakhstan to halt exports as well to prevent price increases in domestic supplies.

No such luck here in the US as speculators are driving prices converting unstable US dollars into commodities.  Wheat prices have risen $1.97 a bushel, or 42 percent, this month and are at their highest level since September 2008.  It’s the biggest gain for wheat contracts according to records dating back to 1959 according to the Chicago Board of Trade.  This is deemed even more unusual for prices to advance during harvest a time which is normally the low point in the yearly cycle. 

Further problems exist as Western Canada was not able to plant 13 million acres due to wet weather.  More

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