[Marxism] In Price and Supply, Wheat Is the Unstable Staple

[Bonnie Weinstein <giobon@xxxxxxxxxxx>]

In Price and Supply, Wheat Is the Unstable Staple

By DAVID STREITFELD

February 13, 2008

http://www.nytimes.com/2008/02/13/business/13wheat.html?ref=business
<http://www.nytimes.com/2008/02/13/business/13wheat.html?ref=business>

 

CHICAGO ? For decades, wheat was a commodity no American needed to think
much about, except the farmers who grew it. The grain was usually plentiful
and prices were low.

 

All of a sudden, those assumptions have been turned upside down. With demand
soaring abroad and droughts crimping supply, the world¹s wheat stockpiles
have fallen to their lowest level in 30 years, and stocks in the United
States have dropped to levels unseen since 1948.

 

Prices have been gyrating in recent days as traders tried to figure out what
to make of the situation. On Tuesday, prices for a sought-after variety,
spring wheat, jumped to $16.73 a bushel on the Minneapolis Grain Exchange,
the latest of several records.

 

Prices for common wheat are up nearly 50 percent since August, and they are
up even more for the most sought-after varieties, leaving buyers, growers
and longtime commodity traders shaking their heads.

 

³Anyone who tells you they¹ve seen something like this is a liar,² said
Vince Boddicker of the Farmers Trading Company in Mitchell, S.D.

 

Though this week¹s prices were nominal records, the inflation-adjusted
record for wheat was set in the mid-1970s, when it exceeded $20 a bushel in
today¹s dollars after huge sales to the Soviet Union.

 

Foreign buying is driving this market, too, but these buyers include South
Korea, Taiwan, Mexico, Nigeria and Venezuela. Economic growth abroad has
given people the means to improve their diets, and they are developing a
taste for products made from wheat.

 

³We haven¹t hit a price that has slowed the international interest,² said
Joe Victor of the commodity research firm Allendale. ³That is something that
definitely has the market excited.²

 

Among the consequences are stretched wallets at home and abroad as food
processors pass along higher costs.

 

³When the price of your raw material quadruples, you can¹t afford not to
raise your prices,² said Timothy Dodd, president and chief executive of the
Dakota Growers Pasta Company in Carrington, N.D. ³Otherwise you¹re out of
business.²

 

In a Jan. 30 conference call, the chief executive of Kellogg, A. D. David
Mackay, said, ³Everyone is feeling these inflationary pressures.² General
Mills cited rising ingredient costs when it increased cereal prices last
June.

 

The Food and Agriculture Organization of the United Nations estimates that
world wheat production will rise this year to nearly 664 million tons, from
about 655 million tons ? not enough to replenish stocks and push down
prices. In December, the organization noted that high international grain
prices were causing food shortages, hoarding and even riots in some places.

 

To damp volatility, three United States exchanges that trade wheat futures
contracts have raised the daily limit on price movements from 30 cents to 60
cents during the past week.

 

For the moment, the mania appeared to be halted in Chicago and Kansas City.
March prices for soft red winter wheat, a low-protein wheat that is less
favored than spring wheat, fell 41 cents Tuesday, to $10.07, in Chicago.

 

Egypt put out an offer for a large wheat purchase on Monday, but chose not
to buy any. That prompted speculation that it was waiting for prices to
fall. But Japan was reported to be bidding for 85,000 tons of American
spring wheat.

 

³When the last person who has to buy in a market does so, you have a top,²
Mr. Boddicker said. ³We¹re quickly approaching that point, if we haven¹t hit
it already.²

 

Few farmers have enough wheat on hand to take advantage of the recent
increases, the trader said. Most sold last fall for prices that seemed good
at the time.

 

The United States Department of Agriculture¹s 10-year forecast, released
Tuesday, sees the wheat shortage as temporary. Stockpiles were predicted to
fall this year to 312 million bushels, from 456 million bushels, before
rebounding to about 700 million bushels by the end of the decade.

 

Higher prices ³will encourage additional acreage and production,² the report
said. Wheat plantings will rise to 65 million acres in the 2008-9 season,
from 60.4 million this year, the Agriculture Department said, though it
predicted the number would then fall because of competition from other
crops.


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