Chicago Board of Trade (CBOT) wheat for September delivery broke through the $7-a-bushel level in US trade for the first time since September 2008, before falling back to $6.93. Prices have risen 50% since late June.
Russia was the world’s fourth largest wheat exporter in the 12 months to June behind the US, the EU and Canada, according to the US Department of Agriculture. And along with other former Soviet Republics such as Kazakhstan, it accounted for about 25% of the world’s wheat exports last year.
Concerns are growing that the rise will lead to a drastic increase in prices of flour-related products such as bread and biscuits worldwide.
Price increase in the French country
The French baking industry lies at the end of the wheat marketing chain. According to some bakers, the price of flour has already risen 25 percent since the onset of the wheat price increase. However, the price of a baguette in France has not yet risen. The basic indicator remains at 90 centimes; but an increase of about 20 to 30 percent is expected in coming weeks.
As a result, France may be planning to organize a meeting of agriculture ministers from Group of 20 countries to discuss price volatility in agricultural commodities.
Price increase in Israel
In Israel the price of bread including the price of traditional Jewish bread is regulated by the government as lead the Ministry of Industry, Trade and Labor to raise the price of bread as a result of the rise in the price of wheat during August.
Supervisor of Prices Zvia Dori said that the calculation for the cost of bread inputs showed a rise of 3.62%. If the cost of inputs is higher than 3%, the price of price-controlled bread is raised.
Minister of Industry, Trade and Labor Benjamin Ben-Eliezer instructed Dori to raise the price of bread only after holidays. He said, “There are many poor families in Israel, and we should avoid, as far as possible, from putting an additional financial burden on them during the Jewish holiday season.”
In early August, the Ministry of Trade raised the price of bread by 3.55% because of the rise in global wheat prices. The ministry cut the price of bread three times during 2009, and raised them once. The upcoming price hike will return bread prices to their level of 2008.
Meat and corn products to follow wheat prices
Russia’s biggest meat producer Cherkizovo (CHEq.L) said on Tuesday that prices are set to rise. “The rise of meat prices this year is unavoidable. We hope that the situation will be limited to 10-15 percent … by the end of the year,” Cherkizovo’s chief executive officer Sergei Mikhailov told the Reuters Russia Investment Summit on Tuesday.
Benchmark wheat prices and now livestock producers are likely to pass on the higher cost of feeding their animals to consumers.
In addition, this upward trend has been sustained by a demand from Asia and from the Middle East for both beef and lamb,” said Pedro Arias, a livestock economist at the FAO in Rome, echoing a widely held view in the industry. “But the traders have not been able to satisfy that demand because herds have been curtailed
The UN Food and Agriculture Organization’s index of meat prices rose in August to its highest level since 1990, up 16 per cent over the past year, after lamb prices hit a 37-year high, beef prices climbed to a two-year high and the cost of pork and poultry prices rose.
Wheat prices rose to their highest level in about two years in August after Russia banned exports of the commodity while corn is continuing to climb, hitting the highest level in nearly two years on Monday.The possibility of introducing grain export control by Moscow would only lead to additional price hikes.
Global wheat production looks set to fall this year but a rise in stocks following the two largest wheat harvests in history in 2008 and 2009 should help to keep a lid on volatile prices hikes.
“Global grain stocks are actually at relatively comfortable levels having been built up following record harvests over the past two years, and this should allay fears of an outright food scare,” Jonathan Blake, manager of the Baring Global Agriculture Fund said on Tuesday.
“Let them eat cake” is the traditional translation of the French phrase “Qu’ils mangent de la brioche”, supposedly spoken by a French princess upon learning that the peasants had no bread. As brioche is a luxury bread enriched with eggs and butter, it would reflect the princess’s obliviousness to the nature of a famine. Lets hope that our economic leaders are smarter than that.