Wheat nearing record price amid supply, production fears

Wednesday, January 19, 2011
By Paul Martin

By Sybille De La Hamaide
January 19, 2011

World wheat supplies are so tight and grain demand so strong that any new hiccup in a major producing area would fire already bullish markets and send European prices near or beyond the all-time highs hit in 2008.

Prices of wheat, a food staple in many developing countries, were at the head of a surge in food prices in 2010, sparking concerns among world leaders that any further increase could trigger deadly riots like those seen two years ago.

High food costs are already behind violent protests in North African countries and the unrest that toppled Tunisia’s president and prompted neighbouring states to speed up wheat purchases to secure supplies.

Swelling concerns about crops in top producing countries after adverse weather, including dryness in the United States, coupled with ever rising demand, are also likely to keep supporting global wheat prices in 2011, analysts say.

“If Mother Nature is unfavourable, which is what it is doing at the moment, we are going to prolong the agony and we have not necessarily seen the peak,” said James Dunsterville, head analyst with Geneva-based Agrinews.

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