July 23, 2012

Global wheat prices up 21% amid US dry weather

During the first three weeks of July, global wheat prices rose by 21% to US$347 per tonne fuelled by dry and hot weather conditions in the US and Russian Federation, the United Nation's body FAO said.

Rising international wheat prices would benefit India, which is exporting the grain since September last year.

"International prices of wheat rose by some 21% in the first three weeks of July. The benchmark US wheat price (No. two hard Red Winter, FOB) averaged US$347 per tonne, 13% higher than in July 2011. But it was still well below the record level of March 2008," the Food and Agricultural Organisation said in its latest report.

Dry and hot weather conditions in the Black Sea region, particularly in the Russian Federation, reduced planting of the spring wheat for 2012 in the US and strong corn prices are exerting upward pressure on wheat prices, FAO added.

According to market analysts, the US is facing one of the worst droughts in the last many years, which is leading to a spike in prices of wheat, soy and corn as sowing has been affected due to lack of rains. US is one of the biggest exporters of these food commodities.

"Export prices of corn increased by 20% in the first three weeks of July compared to their June level. The benchmark US corn price (Yellow, No.two, FOB) averaged US$322 per tonne reaching a new record high," FAO said in its report.

Prices were underpinned by continuous concerns about the impact of hot and dry weather conditions on yield potential of the 2012 corn crop in parts of the US, it added.

At the Chicago Board Of Trade (CBOT), wheat for delivery in September rose by 4% to a four-year high of US$9.35 per bushel (21.22 kilogrammes), while corn for delivery in the same month rose to a record high of about US$8.16 per bushel.

Last September, India lifted the ban on wheat exports through private trade. That apart, in order to ease the storage crunch, the government will export two million tonnes of wheat from its godowns.

India is facing a storage crisis because of record 82 million tonnes of food grains in its stocks against storing capacity of 64 million tonnes. The country produced a record 93.90 million tonnes of wheat in 2011-12 crop year (July-June), which led to an all-time high procurement of over 38 million tonnes this year.