Wheat prices have reached record highs recently experiencing, an 11 year high in August 2007. World wheat stocks are currently at a 50 year low with only around 30 days current supply. These stocks, even with good harvests, will take several years to rebuild and so all these factors are expected to combine to maintain a firm market for grain prices in the medium term.
The price of wheat has increased mainly as a result of crop losses during 2006 and 2007 after extreme weather conditions damaged cereal crops in Europe and Australia. Heavy rain during harvest has reduced yields in France and Germany, whereas high temperatures and persistent drought has reduced yields in Bulgaria, Hungary and Romania. In addition, in North America there is an ongoing switch from growing food crops in favour of feedstock such as maize, corn and soybean for the expanding biofuels industry.
The International Grain Council has cut its estimate for the 2007-08 wheat crop production from an original forecast of 614 million to 607 million tons and indicated that global wheat inventories were at their lowest since 1957.
Another factor impacting wheat prices is the strong demand from importing nations, not only to service current levels of demand but also to increase imports to boost inventories.
