Let me draw your attention to stories on page 77.
One explains why the falling Baltic Dry Index ocean freight measurement does not signal that the world’s economy is slowing. Rather, a surplus supply of ships is pressuring the index lower.
The other story looks at whether environmental concerns will limit the growth of palm oil production. The price of palm oil, which competes with canola and soybean oil, hit a three year high last week.
The prices of most grain and oilseed crops are hitting the highest levels since the 2008 peaks.
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That year, in the week of Valentine’s Day, Minneapolis hard red spring wheat futures peaked at $19.50 per bushel.
Of course, not much wheat was sold at that price, which is the galling thing about such spikes. The reason the price goes so high is that there is almost no grain available to sell.
Early this week, Minneapolis spring wheat climbed above $10 per bu.
Support came from potential damage to the U.S. winter wheat crop and increasing demand from nervous governments in the Middle East and North Africa that want to lay in good supplies to suppress rising food prices.
With local populations in a demonstrating mood following the Egyptian revolution, the last thing authoritarian governments in the region want are more food riots.
You can read more about Egypt on pages 24-25.
Iraq is one country tendering for wheat this week. As we reported in December, a large part of the Middle East is suffering from drought.
This week, the country’s national farmers association said the crop would fall 30 percent short of its 15.5 million tonne goal and imports would be needed to fill the gap.
Flour prices in Iraq have tripled in the last two months.
Other important production regions are also dry.
Light precipitation was forecast in China’s dry winter wheat region this week, but not enough to lift the drought affecting about a third of its crop.
For the second time this year, a top Chinese official, this time president Hu Jintao, visited the drought region and pledged an all out effort by the government to preserve yields. New wells are being drilled to get irrigation water.
Of course, stronger wheat prices will encourage more wheat seeding. The rally of 2007-08 led to a global wheat area increase of about 3.4 percent.
Acreage of the 2011 harvest is also expected to rise.
The International Grains Council forecasts a three percent increase in wheat acreage, which should translate into a crop of 670 million tonnes, assuming average yields. That would be up from 647 million tonnes in 2010.
However, 670 million tonnes would likely be only equal to consumption, meaning no improvement in stocks.
