To wheat or not to wheat?
There is no telling where the ceiling is for wheat prices, in spite of a possible short term correction or profit taking pause. The upward rise in prices in Chicago has been nothing short of spectacular.
When will this run-away market stop?
The Russian decision to ban exports has fuel the market upward. Rusia has become the main wheat export nation in recent years. Altogether, the group of nations that used to be part of the former USSR produce over 100 million tons of wheat a year out of which 34 million are destined to exports.
Critically, Kazakhstan may soon announce its own banning of wheat exports too. Furthermore, due to rising prices other heavy weight exporters may soon join the party as local farmers and speculators may try to benefit from the high export prices while governments will push for banning trying to prevent a sudden drop in domestic supplies. Meanwhile, currencies such as the australian dollar and continued depreciation of the dollar may only add fuel to an already blazing hot fire.
This is just like watching soccer world competition. In this game, US competes with France and US wins. US gets Germany’s market this time because France’s price has soar so high it tripled. Well, you all now know I am a soccer fun.
Just as long as the local supply is enough and is priced reasonably, everything’s up to the Government. Do whatever they need to do to help put together our economy.
I don’t think it is that simple. Local supply may be affected not only by local weather but also by factors that go beyond whatever is regional, say high export prices that may drive local supplies down as greater quantities are shipped offshore. Governments can intervene and have always done so, but grain markets have a way of reacting to circumstances that may make government intervention useless.
We’re definitely back in the competition, ey! France lost to us its avid fan Germany just because its price has tripled! Talk about out-of-control-wheat-price.