Ali’s blog

Mostly quant stuff with occasional digressions

Wheat prices hit new highs

Posted by alifinmath on February 26, 2008

In the FT:

Prices of top-quality wheat jumped 25 per cent to a record high on Monday in their largest one-day increase as Kazakhstan, one of the largest grain exporters, said it would impose export tariffs to curb sales.

The move, which follows similar export restrictions in Russia and Argentina, is likely to put further pressure on already tight global wheat supplies, analysts said.

Spring wheat at the Minneapolis Grain Exchange surged an unprecedented $4.75 to a record high of $24 a bushel as consumers scrambled to secure supplies and speculators poured fresh money into the agriculture market.

The price of spring wheat, used to bake bread, has more than doubled since January and has risen fourfold in the last year, contributing to a rise in global food inflation.

Iraq and Turkey said they were planning substantial wheat purchases to replenish inventories and analysts said China could be forced to follow because of drought damage to its next crop.

Global supplies are scarce after extreme weather damaged the crops in Australia, Canada and the European Union. As a result, the US is experiencing record demand and its inventories are set to drop to the lowest for 60 years.

Climate change is for real and we can expect escalating problems with regard to agricultural produce in the years to come as a stressed biosphere behaves ever more erratically and starts to fail because of the pressure it’s undergoing. In this as in everything else, governments — particularly the US government — will do too little too late.

The population estimates for 10,000 BC vary between 1m and 10m. This was when we still hunter-gatherers, I guess, before the neolithic era. Even if we accept the higher figure — 10m — we are now 700 times as many and this has to tell on our environment. In particular, the environmental impact of those in the West — particularly the United States — is unsustainable with regard to soil degradation, supplies of fresh water, and climate change. This will be reflected in, among other things, pricier food.

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