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The Jump in Wheat Prices Will Make A Loaf of Bread To Cost More

August 3 2010 at 5:14 PM
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Britons to pay more for a loaf of bread as wheat prices jump

4 Aug 2010

Wheat futures jumped to a 22-month high on Monday, hitting $7.11 (£4.47) a bushel on the Chicago Board of Trade. At 1pm New York-time wheat was trading at $6.92.

A severe drought destroyed one-fifth of the wheat crop in Russia, one of the world's largest exporters, and now wildfires are sweeping in to finish off some of the fields that remained after the hottest July for 130 years.
Although grain prices are rising on world markets, with further gains on Monday, they are growing even faster in Russia, so many farmers have liltte incentive to export and are holding on to their harvested grain in the hopes of still higher profits.

"Russia has become the price-maker on the market," said Dmitry Rylko, director general of the Institute for Agricultural Market Studies.
[Armenia imports most of its wheat from Russia]

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Re: The Jump in Wheat Prices Will Make A Loaf of Bread To Cost More

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August 5 2010, 7:11 PM 

Global Wheat Harvest in Question
July 26, 2010
By Mike Adams

The world may have to make do with less bread this year if early warnings prove accurate. Many of the world's largest wheat producers are struggling. Canada and Russia, especially, face disastrous harvests. Global stocks look manageable, but what if something happens to America?

On Monday, wheat prices staged the most dramatic rise in more than 50 years. A bushel of wheat traded above $6, a 42 percent monthly increase, but possibly for good reason.

In Russia, the fertile Volga River region is reportedly in crisis. Parched and cracked clay sparsely populated by withered wheat stalks tell the tale. Drought and heat have reduced the harvest by an expected 50 percent of previous years, the Wall Street Journal reported August 3. Russia is the worlds third-largest wheat producer.

Drought has hit Ukraine and Kazakhstan too, reducing harvests. Within the European Union, there have been reports of patchy drought conditions.

In Canadas breadbasket, an extremely wet spring with widespread flooding delayed planting. The Canadian Wheat Board is forecasting a drop of 35 percent in production. But if Saskatchewan and Manitoba get hit with an early winter, then all bets are really off.

Australia, another major wheat exporter, is coping with widespread locust infestations. "Australia continues to be a 'game of two halves' with prospects looking almost ideal in the east but poor in the west," reports commodities analyst Dave Norris.

Nations relying on food imports are already taking action to mitigate shortages and prevent a return to the food riots of 2008. The Wall Street Journal reports that Egypt, the worlds largest wheat importer, concluded its second major purchase of wheat in the past two weeks --at volumes above what it had budgeted for. China is warning against grain hoarding. Indian officials, it has been reported, have allowed last year's plentiful stockpiles to rot in fields, driving up prices and setting the stage for social problems.

In contrast to much of the rest of the world, the United States looks to have a good crop. The U.S. Department of Agriculture says this years harvest is expected to be strong and that global stockpiles are adequate to fill demand.

Norris estimates global wheat production to be 632.2 million metric tons, down from 661.2 million metric tons last year. In terms of supply, it isn't a disaster yet. And Russian reports may be exaggerated, he says.

However, it will be the poor people of Africa, Asia and South America as usual who will be most affected, according to analysts at Barclays Capital. Europeans and Westerners will just have to pay a bit more for their bread.

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as world wheat costs rise

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August 5 2010, 7:16 PM 

Food prices warning as world wheat costs rise
By Adrian Lowery
4 August 2010

Shoppers were warned today that food prices are set to soar further, after food inflation already jumped in July.

Hovis group Premier Foods said it will have to pass the soaring cost of wheat on to retailers, leading to fears that the shelf price of a loaf of bread could rise by up to 10p.

The warning comes as new figures showed food inflation already rising. The British Retail Consortium said food prices in July were 2.5% up on a year earlier, compared to a figure of only 1.7% in June.

The BRC blamed higher animal feed and wheat costs, and strong rises in the global price of other commodities such as palm oil, cocoa and soya oil.

And it warned that shoppers could be in for more expensive groceries as world commodity prices rise.

The cost of wheat recorded its highest monthly increase in 37 years in July as a harsh drought and subsquent wildfires killing a fifth of Russia's wheat crops. Global wheat costs have rocketed by around 50% since late June.

This will mean price hikes for essentials such as bread, pasta, biscuits and even beer. The cost of poultry may also be affected.

The past five weeks have also seen wheat prices for later in the year - known as futures - reach a 22-month high.

The London wheat futures were last night at £149.40 per ton for November 2010, compared with around £105 before droughts, heatwaves and wild fires hit production in Russia, Kazakhstan and Ukraine.

Martin Savage, trade policy manager at the National Association of British and Irish Milers said: 'We don't really know where the market is going but there's bound to be an impact on food prices. In the past five weeks, the UK wheat future has gone from £100 to £150 a ton and the pace of the market is moving very fast.'

The Grocer magazine reported this weekend that food prices will be at least 10% higher by the new year. Sharp rises in the cost of animal feed the first link in the food chain have sent shockwaves through the industry,

The price of coffee on futures markets has also spiked to a 12-year high recently.But the BRC said shop price inflation held steady in July as food price hikes were offset by falls in furniture, clothing and electrical goods prices.

But fashion chain Next today warned that its prices may have to rise by as much as 8% next year, blaming a hike in costs such as the price of cotton.

'Shop price inflation remains below consumer price inflation and the moderate increases in the price of food in July are being driven by wider economic conditions and seasonal supply changes,' said Mike Watkins at Retailer Services, Nielsen.

Consumer price inflation - which includes a whole basket of goods and services as well as shop-bought goods - has been above target since December, but eased to 3.2% in June.

Premier said it is expecting to hike its prices later this year and warned that second-half profits in its Hovis bread division will fall because of the wheat price.

The group, which also owns brands such as Mr Kipling and Branston Pickle, reported a reversal of conditions last year, when wheat prices were falling.

Are we on the verge of stagflation?

'With world cotton, wheat and gas prices rising, the UK faces increases in the cost of some basic consumer needs (food, clothing and heating), while unemployment is still high and wage growth low or non-existent...'

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Bad Extreme Weather

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August 5 2010, 7:31 PM 

What to make of the bad weather!
I have read that the reason for bad weather is that north pole of earth is wobbling and turning toward sun and getting scorched, while the south pole is wobbling and getting away from sun and therefore in south America people are freezing and dieing from cold at the same time, even while I am writing this comment. Soon earth will shift its axis and shake off most of its inhabitants to death who have being abusing the land, the air, and water of planet earth. Human beings basically are abusing creatures, they abuse each other, abuse each other even when engaged in sex; they abuse all elements that they happen to live in.
Extreme Weather Experienced Worldwide
by Carolyn Presutti
04 August 2010 Voice of america

These past few months have been filled with extreme weather in many parts of the world, and climatologists are trying to figure out what to make of it.

From flooding in China to wildfires in Russia, strong winds in Australia to stiffling heat in the United States, with waterspouts over Miami Beach, Florida. It's the season of unusual weather.

In Pakistan, floodwaters have swallowed whole villages and killed 1,500 people. "It rained the whole day and night. We did not sleep," said Mohammad Yaseen, a retired solder.

In China, torrential rains brought on the worst floods in a decade. Roads under two meters of water. Landslides surprising drivers. "I saw a rock falling down and then suddenly I heard a terrible noise, and another boulder hit my car and I was stunned," said Jiang Qidi, a driver.

In Russia, weeks of record-breaking heat and little rain are hampering efforts to extinguish wildfires. Flames surrounded and nearly trapped this group of volunteers.

Analysts say the world should be aware of the consequences. "We pray to God day and night for rain to fall, to change this weather. It is the only thing which can help us," said Igor Vlaznev, a Russian firefighter.

Russia is the world's third largest wheat exporter and officials there say the drought will cut the grain harvest by 25 percent. Grain exports could drop by a half this year. World wheat prices are already up nearly 50 percent since early June.

"Grain prices are going up. Food prices are going to be going up," said Lester Brown, who is with the Earth Policy Institute.

So what is going on? Is it simply a coincidence that this extreme weather is occurring at the same time worldwide. Or is it a warning of catastrophic climate change? The U.S. National Atmospheric and Oceanic Administration says the earth has been warming over the past three decades and the most recent decade is the hottest ever.

"Even if the temperature trend were flat, we would see extreme weather. What we will see in a changing climate is that these things are more frequent. They may be of higher magnitude, meaning more severe when they happen and that's what we can truly see in a changing climate," said Deke Arndt, with NOAA.

Brown says it does not necessarily mean global warming, but "what we can say is that given the projections for future temperature rises, that we will be seeing more and more Russias around the world. The next time it may be in China, may be in the U.S. midwest or Great Plains. Could be in two or three of them at once. Then we are in real trouble."

Brown says to watch for three key indicators -- the number of hungry people in the world, the price of grain and the number of failing states.

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Russia Bans Weath Export. What Armenia is going to do?

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August 5 2010, 7:45 PM 

Wheat Soars to 23-Month High as Russia Bans Exports; Rice Gains
By Luzi Ann Javier, Maria Kolesnikova and Jeff Wilson - Aug 5, 2010

Wheat extended a rally to the highest price in almost two years on concern other nations may follow Russias export ban, and the grain may reach $10 a bushel, a price not seen since the global food crisis in 2008.

Russian Prime Minister Vladimir Putin said Kazakhstan and Belarus should also suspend shipments as Russias ban was announced yesterday from Aug. 15 to the yearend. Its got $10 written all over it, said Peter McGuire, managing director at CWA Global Markets Pty, who correctly forecast Aug. 3 the surge to $8.50. Wheat last traded at $10 in March 2008, and a gain to that price would be a 23 percent advance from yesterdays close.

Wheat has doubled in less than two months as a heat wave in Russia, the third-largest grower, dry weather in Kazakhstan, Ukraine and the European Union, and flooding in Canada has ruined crops. Russias drought is threatening sowing plans for winter grain, the national weather center has said.

We believe that the rally in wheat prices is overdone, but would not short wheat, Morgan Stanley analysts including Hussein Allidina said in a note to investors, referring to making bets that prices may drop. Other wheat-producing countries may opt to limit exports, potentially boosting prices even though global wheat stockpiles are ample, they wrote.

Wheat for December delivery rose as much as 5.1 percent to $8.565 a bushel, taking gains this week to 23 percent, and the contract traded at $8.53 on the Chicago Board of Trade at 9:41 a.m. in Singapore. Wheat is the best-performing commodity this year on the UBS Bloomberg CMCI Index, ahead of coffee and nickel.

Driving Lamborghinis

When Putin speaks, the world listens, said McGuire at commodity trader CWA, referring to the possibility other nations may also curb shipments. The biggest gainers would be U.S. farmers because they have the supply to meet demand in the global market, he said. Theyll all be driving Lamborghinis.

Halting Russias wheat shipments would be appropriate to contain domestic prices that jumped 19 percent last week, Putin said in Moscow. Kazakhstan and Ukraine were forecast to each ship 8 million tons of wheat this year, according to the U.S. Department of Agriculture estimate on July 9.

Wheat reached a record $13.495 in February 2008, part of a surge in prices that sparked food riots from Haiti to Egypt. Still, concern that lower-than-expected wheat output may contribute to a food crisis is unwarranted at this stage, the UNs Food and Agriculture Organization said on Aug. 4.


This will be a catastrophe for farmers and exporters alike, Kirill Podolsky, the chief executive officer of Valars Group, Russias third-biggest grain trader said yesterday. Valars will stop exports immediately because shipments may be held at customs until the start of the ban, Podolsky said. As of today, Russia has no grain market, he said.

Exporters from the Black Sea may have no choice but to halt shipments unless the region gets enough rain, McGuire said. If it gets hotter for longer, then its going to destroy the crop completely, he said.

The U.S. Department of Agriculture may pare its estimate on the nations wheat inventory at the end of the 2010-2011 season by 12 percent to 964 million bushels, from 1.093 billion bushels last month, as exporters boost shipments to make up for lower supply from other countries, Allendale Inc., a farm marketing adviser and broker, said in an e-mail today.

That may push the global ending stocks to 180 million metric tons, compared to the USDA estimate of 187 million tons last month, Allendale said.

Cargill Inc., the largest U.S. agricultural company, said implementing trade barriers in response to higher wheat prices and lower yields exacerbates supply problems.

Wheat Stockpiles

World wheat stocks are higher than they were during the wheat-price spikes in 2008, said Mark Klein, a spokesman for the Minnetonka, Minnesota-based company. Such trade barriers further distort wheat markets by making it harder for supplies to move from areas of surplus to areas of deficit.

Putin told a government meeting in Moscow that Russia has sufficient reserves of grain, but we must prevent domestic prices from rising, preserve cattle herds and build up reserves. The ban also applies to barley, rye, corn and flour.

World wheat stockpiles may fall 2.5 percent to 192 million tons by June as the dry weather hurts the outlook for crops in Russia, Kazakhstan, Ukraine and the European Union, the International Grains Council said on July 29, reversing a forecast for higher inventories.

To contact the reporters on this story: Luzi Ann Javier in Singapore at; Maria Kolesnikova in Moscow at; Jeff Wilson in Chicago at

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