Wheat Futures See Price Increase as Supply Cannot Meet Demand



U.S. wheat supply will be stretched due to the lost crops this year from droughts and flooding in other countries.

U.S. wheat supply will be stretched due to the lost crops this year from droughts and flooding in other countries.

As the demand for U.S. wheat supply has increased, demand on corn has gained as well since it can often serve as a substitute for wheat in food supplies. This has pushed prices into higher levels. Now with news from the International Grains Council that global production will be less than predicted, prices in wheat and corn futures should raise once more.

The global wheat harvest has been predicted at 644 million metric tons, 1.1 per cent lower than last month’s estimate. The demand is actually at 657 million tons. Supply has been impacted by weather conditions in key wheat production and exporting countries like Russia. Russia, Ukraine and Australia suffered droughts while excessive rains affected wheat crops in the European Union and Canada. Countries like Pakistan and China which used to grow some of its own food supply wheat will now be looking for imported wheat due to the flooding of Pakistan and mudslides and flooding in China that wiped out a large number of their crops.

Russia, who is one of the top three exporters of wheat, earlier this summer, banned all exports of the grain through the end of December when they lost 25 per cent of their own wheat crops. They will now be importing as much as 6 million tons of grain through June 2011.

The price of wheat has increased as much as 50 per cent since Russia announced their decision to stop exports of their own crops of wheat.

Corn has seen an increase also. Supply of corn as well as another major crop, soybean, looks good so far in predictions, so the demand of other countries on U.S. corn supply should not be as major as that of U.S. wheat. “Strong demand for U.S. corn and a tight supply situation provide support” said Luke Mathews, a commodity strategist at Commonwealth Bank of Australia. “Despite a record crop in the U.S., the demand side has been strong and stock availability remains at a tight level.”

Comments & Debate

  1. November 27, 2010 at 12:58 pm khatoon Baigum Commented:

    this is boring *snore*

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