A Day's Wages for a Loaf of Bread

Report: Food Prices Already Starting to Skyrocket

August 9, 2010

Moneynews - Experts warn that overall food-price inflation is inevitable, as Wal-Mart reportedly has already hiked prices amid a recent jump in wheat prices and the failure of the Russian harvest.

The most immediate impact will be felt in the price of bread and bakery products but other food items which make use of grain will also rise, according to analysis from Verdict research. This includes some meat products where grain is used as animal feed.

Meanwhile, a recent JPMorgan survey of supermarket pricing in Virginia showed a 5.8 percent increase in average prices at Wal-Mart, which represents the most significant sequential increase since the inception of the study in January 2009, the Business Insider reported.

The survey compared a 31 item like-kind basket at a Wal-Mart Supercenter, Kroger, Safeway, Harris Teeter, and Whole Foods, the Business Insider reported.

Should wheat prices remain elevated for the next few months, shelf prices for many products could go up by 6.7 percent within a year, Verdict reported. Some items, such as croissants, could go up by as much as 11.1 percent.

While the failure of the Russian wheat harvest has caused a temporary spike in prices, these high prices won't last for long because of excess production in China and the United States. But global fundamentals are supportive of a long-term rise in the price of food, The U.K.'s Telegraph reported.

At the moment there are just fewer than 7 billion mouths to feed around the world. The United Nations believes there will be more than 9 billion people by 2050.

In fact, the UN's Food and Agriculture Organization forecasts that total world demand for agricultural products will jump 60 percent between now and 2030, rising much more rapidly than the population.

This rapid increase is because the areas of the world where the population is rising the fastest are also the areas of the world that are moving out of poverty, the Telegraph reported.

Demand for grains in emerging markets increases more than the population because of one simple fact — richer people eat more meat. This increases demand for grain feeds for livestock over and above that used for human consumption.

Ironically, a wheat stockpile in India that could feed 210 million people for a year is starting to spoil because the government lacks enough warehouses to store it.

According to a government estimate obtained by The Associated Press, 17.8 million metric tons of wheat are exposed to the elements — stored outdoors, under tarps in India's pounding monsoon rains. The wheat could alleviate hunger in a nation where one in two children are malnourished.

Russian Drought Could Push Up Food Prices

Wildfires in Russia have destroyed millions of hectares of crops, leading to higher barley prices.

August 9, 2010

guardian.co.uk - Shoppers could see the cost of the meat and poultry in their baskets rise as the price of barley has more than doubled over the past six weeks due to continued fears over the drought affecting Russia and Ukraine.

Russia is the world's second largest producer of barley after the EU and the cereal crop is used by many farmers as animal feed. The recent price rise could also have a possible knock-on effect on the cost of beer as a significant proportion of the remainder of barley production goes into the brewing trade on both sides of the Atlantic.

Barley is the latest commodity to see a dramatic price rise in recent weeks.

The worst drought for generations in Russia has already caused a 50% jump in the price of wheat, the world's most-consumed cereal, since June, and last week president Vladimir Putin announced that Russia would freeze grain exports. Attention is also being focused on Australia, the world's fourth largest exporter of wheat, where this year's crop may be hit by dry weather in Western Australia, which accounts for 40% of exports. Prices have also been put under pressure by very wet weather in Canada at planting time, which reduced acreage.

But some commodity analysts have blamed speculators for pushing up the price of wheat and barley. Russian wheat, for instance, is mainly exported to the Middle East which has access to stocks from other areas, while strong harvests are expected in Europe and the US.

Traders are awaiting a key US Department of Agriculture report on stocks and production which is due out on Thursday and ahead of the report some speculators have cashed in their profits. The current projection is for the 2010/11 global wheat stock to be 187m tonnes, one-third higher than in 2007/08 when commodity prices were squeezed dramatically higher.

US wheat futures have fallen so far today, adding to losses made late last week. Chicago Board of Trade wheat for September delivery had dropped by 4.34% to $6.94 per bushel by early morning trading, adding to a 7.6% fall on Friday. The December contract dropped 4.01% to $7.25.

Wheat Prices Soars as Russia Bans Exports

August 6, 2010

Farm Weekly - The severe drought in Russia has decimated the country's grain crop, prompting a ban on exports and driving global wheat prices skyward.

Yesterday Chicago Wheat for December 2010 was up 45 ¾ cents to US 755½ cents per bushel, which Rabobank says are at two-year highs.

Locally, AWB is quoting local wheat contract prices as high as $300 a tonne in some districts.

According to wire services, Russia is normally the world's number three wheat exporter, shifting 21.4 million tonnes overseas last year.

But this year's total grain harvest forecast has been slashed to 70-75mt, with domestic grain consumption usually running at 77mt.

AWB says that added to the Russian drought are overly wet conditions in Germany, forecasted rain potentially causing further losses to crops both sides of the US/Canadian border, and continuing dry in Western Australia, which are all feeding the bullish atmosphere.

Rabobank has downgraded its 2010/11 global wheat production estimates by 30mt from the United States Department of Agriculture's May forecast, and some 17mt from the July forecast.

It says global wheat production is now likely to reach 644.2mt, down 35.6mt on last year.

The Truth About India's Wheat Reserves

March 23, 2010

Market Skeptics - ... The truth about India's wheat reserves is finally surfacing.

1) Around 90% of India's 2009/10 ending wheat stocks lies in the open and is no longer fit for human consumption.

2) The shelf life of wheat stored in open is not more than one year, which means most of India's reserves has long since rotted away. Rather than dispose of this growing inventory of inedible wheat, India wastes valuable storage space stockpiling more of it every year.

3) To make matters worse, India's policy of buying all wheat at the same price regardless of its quality has been encouraging farmers focus on quantity rather than edibility. This means that most of India's wheat reserves were already of poor quality (if not inedible) at the time of harvest.

4) This explains why India has been extremely reticent to release its stocks despite spiraling food price inflation: they don't exist!

5) It took persistent double digit food inflation to finally focus the Indian media's attention on the country's rotting wheat reserves.

They too are supposed to have huge government reserves, yet despite spiraling food price inflation the authorities have been extremely reticent to release these stocks onto the market at anything like a sensible price.

Prediction: The USDA will completely ignore the news and pretend that all of India's wheat reserves still exist (like it did with the recent revelations from the USDA's attache in China that last season's crop was probably overstated to the tune of 8.5 MMT)

Conclusion:The world is heading towards an unprecedented food crisis in 2010. Once food inflation picks up in the US and around the world and the media begins to turn their attention to the problem, everyone will be horrified to learn that no one has any grain reserves. Then you will see TRUE panic. Panic which the can't waive its magic (money-printing) wand and make go away.

GM Rice in China's Grain Reserves Could Spread into Other Places

July 21, 2010

China Daily - Lorena Luo, a food and agriculture specialist with non-governmental environmental organization Greenpeace, said its monitors found three distinct GM-positive rice samples produced in 2007 by two grain processing companies in the Hubei capital of Wuhan.

"In April, we bought three rice samples weighing 1,200 grams in Wuhan - all of which has been tested as GM at a qualified lab in Hong Kong," Luo told reporters on Tuesday.

The test results indicated the rice was developed from one of the two strains of pest-resistant GM rice, which was cultivated by the Wuhan-based Huazhong Agricultural University and was issued with bio-safety certificates by the Ministry of Agriculture last August.

Luo, however, declined to name the Hong Kong-based laboratory.

"Most grains in our company were coming from nearby State-owned grain depots as well as the national grain reserve," an unidentified worker at the Guocheng Rice Company, one of the two companies with the tainted rice samples, testified in a video provided by Greenpeace.

"If true, the report will be a serious problem, as GM rice in the national grain reserves could spread into other places," Lu Bu, a researcher from the Institute of Agriculture Resources and Regional Planning at the Chinese Academy of Agricultural Sciences, told China Daily on Tuesday.

According to regulations governing the administration of central grain reserves issued in 2003, China will annually rotate 20 to 30 percent of its total central grain reserves based on domestic supply and demand.

"It is very likely that the rice produced in 2007 will soon be rotated, as it will soon be past its due date," Lu said. "For instance, some may be sold to local flour mills."

In addition, since grain reserves are usually conserved for famines and other disasters, some of the rice may have already been sent to drought and flood-stricken provinces this year, he said.

The Ministry of Agriculture would not comment on the Greenpeace report on Tuesday. In March, however, ministry officials sought to dispel these concerns, saying "there is no commercial planting of GM food crops in China now."

Contrary to these assertions, Luo said, other illegal commercial planting cases have also been recorded in a number of different provinces in recent years, such as in Hunan and Jiangxi. In May, for example, agricultural bureau officials in Hunan province tracked down 1.5 tons of GM rice.

"The government has, apparently, not taken strict measures to crack down on the planting of GM rice," Professor Jiang Gaoming, of the Institute of Botany at the Chinese Academy of Sciences, told China Daily.

"Farmers always have no idea about whether they are planting GM rice or not," he added. "Therefore, the government has to strengthen its control of GM rice seeds from the start."