A parched Russian wheat field in Voronezh region, about 260 miles south of Moscow, Monday, Aug. 2, 2010, shortly after it was harvested.
If you notice the price of bread, pizza and cakes rising in coming weeks here's a possible reason: Russian officials banned wheat exports Thursday due to that a lengthy drought will leave their farmers unable to provide that nation's domestic needs.
The move caused wheat-futures prices on commodities markets to hit their highest level in two years and raised fears for higher food prices.
The Wall Street Journal reported the following:
September wheat futures at the Chicago board rose the exchange-imposed daily limit of 60 cents to close at $7.85 3/4 a bushel, an 8.3% rise and the highest level since August 29, 2008. U.S. wheat futures have gained nearly 85% from a nine-month low in June amid expectations that demand for U.S. wheat will increase.
The export ban by Russia, a major producer and supplier to other countries, comes after several weeks of deteriorating prospects for the Russian wheat crop. Market participants had speculated in recent days that an export ban was likely, but the full effect of such a possibility clearly hadn't been priced in.
While most market participants don't foresee the kinds of problems that sparked food riots in 2008, the increase in prices and the uncertainty over future supplies of the grain have forced buyers and sellers to recalibrate their plans.
Russia is typically among the world's largest wheat exporters. An excerpt from a USDA briefing report:
The United States is the world's leading wheat exporter. In most years, the United States, Canada, Australia, the EU-27, the former Soviet Union (including three major wheat exporters: Russia, Ukraine, and Kazakhstan), and Argentina account for about 90 percent of world wheat exports.