Hoarding and additional price gains might follow the second straight year of wheat harvests lagging behind demand, Bloomberg reports.
Drought and floods destroying wheat crops pushed up wheat futures by 72 percent in the past year while China, the top producer of the grain, is facing an onslaught of dry weather.
"Whenever you get the market as tight as we are now, hoarding becomes widespread," Abdolreza Abbassian, a senior economist at the UN Food and Agriculture Organization, told Bloomberg. "We need at least a 3 percent to 4 percent increase in total wheat production."
The Chinese minister of agriculture announced on Wednesday that about 42 percent of the nation's wheat crop will be damaged by a dry spell that runs through spring. Rain in Northern China has been well below normal rates since October, according to the United Nations Food and Agriculture Organization.
"For a country as big as China showing some early problems, it's not very encouraging," Abbassian said. "We decided to flag out China early to give signals to other countries. For spring planting, it could affect decision-making."
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