Christ First Forum

http://www.bloomberg.com/news/2011-06-0 ... ansas.html


May 12 (Bloomberg) -- Paolo Barilla, vice chairman of Barilla Holding SpA, talks about the impact of global inflation on food production. He speaks with Francine Lacqua on Bloomberg Television’s “On The Move.” (Source: Bloomberg)

The worst droughts in decades are wilting wheat fields from China to the U.S. to the U.K., overwhelming Russia’s return to grain markets and driving prices to the highest levels since 2008.

Parts of China, the biggest grower, had the least rain in a century, some European regions are the driest in 50 years and almost half the winter-wheat crop in the U.S., the largest exporter, is rated poor or worse. Inventory is dropping 8.8 percent, the most in five years, Rabobank International says. Prices will advance 20 percent to as high as $9.25 a bushel by Dec. 31, a Bloomberg survey of 14 analysts and traders shows.

Wheat as much as doubled in the past year as crops failed, spurring Ukraine and Russia to curb shipments and increasing the U.S. share of global sales by the most since 2004. Russia ending its export ban on July 1 and Ukraine lifting quotas may not be enough as crops wither elsewhere, fuelling gains in food prices which the United Nations says are already near a record.

“In 32 years, I’ve never seen so many problems in so many places,” said Dan Basse, the president of AgResource Co., a farm researcher in Chicago. “We’re concerned about the world story now,” said Basse, who has been studying agricultural markets since 1979 and expects prices as high as $10 this year.

For Paolo Barilla, vice chairman of Parma, Italy-based Barilla Holding SpA, the largest pasta maker, the yo-yo price moves are his biggest business worry, he said in an interview last month. Rising demand means grains will keep costing more, John Bryant, the chief executive officer of Battle Creek, Michigan-based Kellogg Co., the largest U.S. maker of breakfast cereal, said in a conference call last month.

Grain Prices

Higher prices will help U.S. farm income rise 20 percent to a record $94.7 billion this year, the government estimates. It also means the most profit ever for Moline, Illinois-based Deere & Co. (DE), the largest maker of agriculture equipment, analysts’ estimates compiled by Bloomberg show.

Futures traders anticipate rising wheat prices through March 2013, according to data from the Chicago Board of Trade. Speculators almost tripled their bets on gains in the two weeks ended May 31, figures from the U.S. Commodity Futures Trading Commission show. The most widely held option gives the holder the right to buy wheat at $9 for July.

Wheat fell 2.6 percent to $7.7375 a bushel this year by the close on June 3, trailing the 11 percent gain in the Standard & Poor’s GSCI Index of 24 commodities. The MSCI All-Country World Index of equities rose 2.8 percent and Treasuries also returned 2.8 percent. Wheat declined 1.2 percent today to $7.6425. . . more