The most severe drought in decades saps wheat fields from China to the U.S. and Britain, prevents Russia back to world grain markets and raise prices to the highest level since 2008.
In some areas of China, which is more than all wheat, rainfall this year has dropped the least a century. In some parts of Europe there was a drought 50 years. And in the U.S., the world's largest exporter, nearly half of winter wheat crops destroyed or badly risen. As stated by Rabobank International, inventories decreased by 8.8%, which is the highest rate in five years. According to the poll 14 analysts and traders, which was conducted by Bloomberg, prices will rise by 31 December by 20% to 9.25 dollars per bushel.
In the past year due to poor harvests wheat prices have doubled, forcing Ukraine and Russia to limit supplies to foreign markets. In this regard, the U.S. share of world exports increased the most since 2004. Russia lifts ban on exports from July 1 and Ukraine abolishes quotas. But this may not be enough, as in other places the crops die, causing the rise in food prices, which according to the UN, already close to the record.
"For 32 years I have never seen so many problems in so many places," — said the president of agricultural research company AgResource Co. Chicago Bass Dan (Dan Basse). "We are concerned about the situation in the world" — said Bass, studying agricultural markets since 1979. He believes that this year the price will rise to $ 10 a bushel.
The deputy chairman of the largest manufacturer of pasta Italian Paolo Barilla Barilla Holding (Paolo Barilla), such sharp price spikes cause the greatest concern, as he said during an interview last month. The growth in demand means that the grain will cost more expensive. This was during the May video said and John Bryant (John Bryant), director-general of Michigan Kellogg, is the U.S. leader in the production of cereals for breakfast.
Rising prices would increase U.S. farm income by 20% to a record high of 94.7 billion dollars. That is the assessment of the government. It also means higher profits for the company in Illinois Deere & Co, which is the largest manufacturer of agricultural equipment, as evidenced by analysts' estimates compiled by Bloomberg.
Traders in the futures market predict a rise in wheat prices to March 2013 inclusive, as indicated by the data of the Chicago Chamber of Commerce. Stockbrokers almost tripled their rates on profits in the two weeks ended May 31, as shown by the figures of the American FTC Futures transactions. The most common option gives the holder the right to buy wheat on July 9 dollars.
This year, the price of wheat fell by 2.6% to 7.7375 dollars per bushel. This happened after the 11 percent increase in commodity index GSCI, constitute Standard & Poor to 24 names. The global stock market index MICEX MSCI All Country World Index rose 2.8%, and profit on the bonds as 2.8%.
The last time prices were at the level forecast in the Bloomberg 9.25 dollars in 2008. It was just the middle of the three-year period, when, according to State Department estimates, in the world there was more than 60 food riots. No one predicted a return to the February record this year in 13.495 dollar and global stocks will be 44% higher than in 2008, as indicated by the analysis of the data of the Ministry of Agriculture.
Within two days after the world's second largest wheat exporter after the U.S., Russia announced May 28 to lift the embargo, wheat prices fell by 7.4%.
According to the Ministry of Agriculture, this year's wheat crop in Russia, severely affected by the worst in half a century last year's drought, may increase by 48% to 90 million tonnes. U.S. Department of Agriculture said in May that wheat exports will increase more than doubled — up to 10 million tons.
"Fundamentally, the Russian export to create a downward trend, until there will be some new challenges on the supply or demand for corn or wheat — said Lawrence Kane, a market adviser (Lawrence Kane) of Stewart-Peterson Group, Illinois. — My prediction is that the wheat will keep a downward trend. "
Demand some importing countries may decrease with increase in their yields. Egypt, the largest buyer in the 12 months to June 2011 will get the grain by 6.9% lower, and in Morocco, according to estimates by the Ministry of Agriculture of the United States, the decline in foreign purchases is 46%.
According to the chief of the grain port of Rouen in France, from the end of March this country who are now second in the world in the export of wheat, reduced shipments to North Africa by 49%. This decline suggests that the return to the beginning of the year panic not. Then to North Africa increased their reserves to pay rising prices with the start of riots from Egypt to Morocco.
The expected reduction in demand for imports will not stop the growth of global procurement, predicts the USDA.
China this year could double the imports of wheat, bringing it up to about 3 million tons, said Li Qiang (Li Qiang), served as the CEO of the largest independent company for the study of agricultural markets Shanghai JC Intelligence Co. According to him, the harvest in China may decline because of the drought to 96.5 million tonnes, well below the forecast of the Ministry of Agriculture to 115.5 million tons.
About 80% of wheat in China is growing in irrigated areas, which reduces the potential for damage. This was in late May, said economist Dan Manternah (Dan Manternach) from a research company for agricultural markets Doane Agricultural Services, whose headquarters is in St. Louis. According to him, when in areas without irrigation in the next three weeks, there is no rain, it would pose a threat to crops again.
"This is to my mind the driest year — says the 35-year-old farmer from the rapidly growing central Chinese province of Henan Peytszyun Wang (Wang Peijun). — Engage irrigation too inconvenient, too expensive. " This peasant income from crops used for the purchase of maize seeds, which he plants after harvest.
The average data of seven forecasts gathered by Bloomberg at the end of May, the analysts and traders, the current crop of wheat in uniting the 27 EU countries could fall by 3.5% to 131 million tons. In France, this year has been the driest spring in half a century, and in Britain in April turned out to be the warmest for 352 years, as meteorologists say the two countries.
"I have been farming here 30 years and this is the worst season in my memory — says 53-year-old Robert Law (Robert Law), who grows corn in the English county of Hertfordshire on 5000 acres of land. — The period of drought was definitely longer than ever before. "
Harvest in France
Harvest in France, which is the largest grain producer in the EU, will decrease this year by 12% to 4-year low. This is evidenced by the Paris Agricultural consultancy Agritel. Wheat harvest in Germany dropped by 4%, as evidenced by the grain trader from Hamburg Alfred C. Toepfer International. Previously, the company forecasted growth.
Producing pasta company Barilla is sometimes forced to raise prices, and that is a cause for great concern, because "people do not understand why prices rose so dramatically in such a short space of time." This moderator Bloomberg «On the Move» Francine Luck (Francine Lacqua) said Paolo Barilla.
The world is undergoing "a long-term upward trend in the cost of goods, — told investors during the May video of John Bryant of Kellogg. — Therefore, looking at 2012, we say — yes, probably, it will be inflationary. "
Illinois company Deere & Co. ending in the fiscal year in October will receive a net profit of 2.71 billion dollars, which is significantly more than 1.865 billion received in the previous year. This is the average forecast of the results of seven Bloomberg estimates.
As of May 29, about 44% of winter crops in the United States were in poor or very poor condition, according to the Ministry of Agriculture. In the previous two months rainfall in most parts of Kansas, Oklahoma and Texas were two times lower than normal, the National Weather Service said the U.S.. But these states are major producers of winter crops.
"In those windy days, dust rises into the air, and the sky turns brown," — says 53-year-old David Klivinger (David Cleavinger), handles the 3500 acres in Uildorado, Texas. He had already lost the wheat harvest about 1,200 acres. "The price is great, but we must also grow a crop. If there is no harvest, even $ 40 a bushel will not help. "