Commodities: Wheat Near Record Prices Again; Food Price Riots To Cause Price Hikes

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The local newspaper reports that there is trouble in the wheat area. World wheat supplies are extremely tight and grain demand is so strong that any small problem in a major producing area would cause soaring prices to skyrocket to new record highs. The huge drop of the U.S. dollar does not help.

World leaders worry that further increase could trigger deadly riot as high food prices are already triggering violent protests in North African countries, including the chaos that toppled Tunisia's president. This also caused neighbouring countries to speed up wheat purchases to secure supplies, compounding the problem.

In addition, prices in 2011 will be fueled further by increasingly chaotic weather patterns that have seen major floods in Australia and Brazil. If the weather in the summer in the northenr hemisphere is the same, significant disruptions to food supplies could happen.
Prices doubled in the 12 months ending in  Jan. 18 in Europe, which is the world's second-biggest wheat exporter, after Russia banned exports after a severe drought. U.S. wheat prices also surged over the past year.
Citizen: "There is little sign of relief on the horizon for prices of quality wheat. Analysts do not expect Russia to open its gates to exports until at least July.

Devastating floods in Australia and dry weather in Latin America and parts of top exporter the United States are feeding a bullish mood in global grain markets, with prices in Europe hitting nearly three-year highs every week since mid-December.
European milling wheat futures are only 15 per cent away from their all-time high of 300 euros per tonne in 2007/08. Analysts say it would not take much to fill the gap.
At $9 U.S., Chicago Board of Trade wheat futures would still be 32 per cent below the 2008 high of $13.30 a bushel.

Analysts said U.S. wheat futures were unlikely to revisit their 2008 peaks as expectations of higher global wheat crops in 2011 would keep a lid on prices, even in case of weather damage, with the most ambitious estimate at around $9.

Key in the coming months will also be the amount of quality wheat available to meet strong uncovered demand, analysts say.

High-protein wheat is in short supply globally because of weather setbacks in Canada and Germany and now in another major exporter, Australia, where waterlogged fields reduced most of the current crop to low-grade feed wheat".