A new report from the Financial Times illustrates the complex situations that arise at the nexus of political and economic realities. As wheat prices rise – on the Comex in New York, wheat futures contracts for September delivery were up 21 cents to $6.16 per bushel – India’s government holds massive stockpiles of wheat and rice that are at risk of rotting away as monsoon rain begins to fall.
Around 10 million tons of wheat could be afflicted with rot, or a sixth of the country’s total stockpiles, reports the FT.
Meanwhile, the global surge in food prices over the past two years – driven by increasing consumer demand along with more grain going into bioethanol and animal feed – has put even more pressure on poor families.
The FT suggested that if India dumps the wheat on the market, it could slow or even reverse a recent surge in the price, which reflects concerns over severe drought in Russia and heavy Canadian rains.
If the Indian government dithers, though, the wheat could be lost, forcing it to go to international markets and causing a spike in wheat futures.
India’s Supreme Court took the unusual step of issuing a direct statement, saying “In a country where people are starving, wastage of even a single grain is a crime,” and urging the government to distribute the stockpiles.
These effects have pushed wheat to its highest level in over a year. The Russian situation is particularly dire – some fear it could make the agricultural giant in a net importer of wheat this year. Temperatures in Russia’s wheat-producing provinces have regularly soared over 100 degrees this summer, parching the earth and the crops.
If temperatures do not soon subside, a vast portion of Russia’s wheat crop could be permanently lost, further compounding the misery for poor people vulnerable to fluctuations in the price of essential food commodities.
The fears infecting the wheat market are being felt in other areas as well – corn and beans have both risen in price, on speculation that farmers might switch to these feeds if wheat gets too expensive. In general, demand for wheat as animal feed has been increasing, as developing nations like China become more affluent and consume greater quantities of meat and fish.
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