Wednesday, August 4, 2010

Wheat and Heat

2010 Kansas Wheat Crop just before harvest

You may have seen the yesterday's articles in the Wall Street Journal and Bloomberg about the surge in wheat prices due to the Russian drought.
Based on some of the comments to these articles, there seems to be some confusion about how the wheat planting and harvesting cycle works. Unlike fruits, vegetables, corn, and soybeans, winter wheat (the kind grown from Nebraska to Texas) is planted in the fall and harvested from May to July, south to north. Kansas (the #1 wheat state) had the 5th largest harvest ever. The recent hot, dry weather in Kansas (Wichita had another record yesterday with 109°) has had no effect on the wheat because it was already in the bin in Kansas and points south. News reports indicate the harvest has gone well in Nebraska.

There are a couple of ways to look at this: Yes, bread prices might go up. But, the harvested wheat in Kansas gained about $500,000,000 in value that farmers can use to take vacations, spruce up their homes, etc. Since much of the money will be paid by foreign buyers, the additional monies will, on balance, improve the U.S. balance of trade and improve the U.S. economy.

That said, there are reports that the Russian drought -- the worst in more than 50 years -- will threaten fall planting if it continues. That raises the possibility of a worldwide grain shortage. I'll keep an eye on this and post updates as appropriate.

UPDATE:  10:15am, Wednesday:  AccuWeather has a story about the Russian drought here.

UPDATE #2: 11:20pm Wednesday: As if the above isn't scary enough, read this. It is the latest on the serious threat of wheat rust.

1 comment:

  1. And now Russia has placed a ban on their grain exports through the end of the year.


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