Wheat Down 40 Percent from February High

Since the record price of wheat in February, prices have continued to fall as an expected large harvest has caused the golden grain to fall by 40 percent since the $13.50 a bushel record.

On the Chicago Board of Trade (CBOT) soft red winter wheat has plunged to $8.01 a bushel, the lowest since November 2007.

According to the International Grain Council, wheat will probably reach a record harvest of 645 million tons in 2008-09.

"The big rise in prices in 2007 and early 2008 was a strong incentive to increase the planting of wheat," said Sudakshina Unnikrishnan, an agricultural analyst at Barclays Bank.

"The market is pricing-in expectations of a bigger crop from summer onwards."

Government subidies by the U.S. and Europe for corn-based ethanol has been a major contributor to the price increases, as farmers over the last several years have taken acreage out of wheat production and put it into corn.

Wheat farmers will probably be a year too late to get the huge prices, as their huge harvest will cause price decreases, as is already being factored into the market.

Global Wheat Production Expect to Increase 6%

A report from Utrecht, Netherlands-based Rabobank, says the global production for wheat should increase by 6 percent this year, making it a record harvest globally.

Motivating the higher output is the increasing prices of the commodity, based on growing food demand, investors, biofuels and feed for animals. Stockpiles around the world also plunged last year causing the grain to increase in price as well.

"Wheat production is forecast to rebound strongly, resulting in a partial recovery in world inventory levels and taking some pressure off world prices,' a team of analysts in Sydney, Australia, wrote in the report.
It is expected the harvest will bring in an additional 37 million metric tons to bring the total for the the year to 640 million tons. Stockpiles around the world should grow by 9 percent as a result.

This should help bring prices down during the second half of 2008 said the report, as production grows beyond demand by about 12 million tons.

U.S. Wheat Closes Mixed - Weather, Nearby Markets Key Factors

U.S. wheat borrowed from its commodity neighbors corn and soybeans on the CBOT, helping it to gains, even though it was the "the weakest link in there, of all the grains," said Larry Glenn, owner of Glenn Commodities. "It's been following."

On the Chicago Board of Trade, May wheat remained at $9.34 a bushel. Minneapolis Grain Exchange May wheat ended at $13.20, a 5 cent increase, and May Wheat on the Kansas City Board of Trade settled 1 cent higher.

Continued forecasts of rain for the U.S. plains dampened expectations for a large, new crop, causing wheat to pull back from its borrowed surge earlier in the day.

According to the U.S. Department of Agriculture, expected supply and demand continues on course U.S wheat carryout, and remains at 242 million bushels; the same as in March.

Some analysts said the data from the USDA had no significant impact on the wheat markets, as weather, along with nearby markets are the what's affecting the wheat market more than anything else.

Another key factor is the expected huge global harvest this year, which could also hinder prices. Others think importers may keep old wheat inventory minimized, while waiting for the new crop to enter the market.

U.S. Government Needs to Look in Mirror to find Source of Food Price Increases

With wheat and corn being two of the primary food sources in the world, the U.S. government needs to only look in the mirror to find out where the origination of these huge price increases are coming from.

Why? The totally ignorant idea to mandate ethanol increases is proving to be a destructive force in food prices around the world.

The reason the wheat prices are increasing, is the growing price of corn, as a result of the artificially induced ethanol market, has resulted in less wheat being grown, which has then caused the prices to rise.

Creating the artificial and basically worthless ethanol market has already caused huge disruptions in the market, and we're only getting started.

The Bush administration mandated an increase of six times current ethanol use by 2022, which is skewering the food markets in a big way.

As usual, when governments enter into areas they have no idea what they're doing, they end up causing disasters, as they aren't able to take into account the unintended consequences which always arise from these types of initiatives.

To exacerbate all this, wheat harvests from around the world have been poor, as weather slowed the harvests in parts of China, Europe, Australia, and a number of other Asian countries. This created a demand for American grown wheat which was unexpected; causing prices to rise again.

We need to drop the ethanol mandate, which is starting to be questioned by an increasing number of agriculture experts and scientists as to its real value; similar to global warming being discovered recently as built upon faulty computer models, and in reality the weather worldwide has been declining in temperature since 1998.