As wheat prices rise due to insufficient global supply, the big question is how concerned should we be about the high prices? Wheat is the latest agricultural commodity to raise costs. Wheat prices have risen 50% since last June, and prices are the highest since 1973. This is due to droughts and fires destroying crops in Russia, who is the third-largest wheat exporter in the world.
With Russia’s crop supply affected by poor weather conditions, the future of wheat prices lies with other large wheat producers such as the United States and Australia. These countries are expected to produce large amounts of wheat with favorable weather conditions, and could cause wheat prices to stabilize. While the United States and Australia look to be promising for the wheat market, large producers like Canada and the UK may cause prices to stay high due to lack of supply and extreme weather conditions. Canada has suffered devastating rains, while the UK had a very dry six month period which has lowered wheat output. Right now the wheat market is very volatile and it remains uncertain where prices will go next.
Overall, world food prices have risen by 83% in the past 10 years. Increasing prices can be tied to developing countries such as China, India, and Brazil who have the funds to pay more for their food. Also, fast growing populations, increasing demand for biofuels, and global warming has had its fair share of impacts on food production prices. Along with wheat, other agricultural commodities such as maize, cotton, chicken, pork and beef prices have risen. The long term picture shows that food prices are on the rise, but it is still unclear how long wheat prices will remain high. Hope is that this price increase remains a short term problem.