With the harsh weather in Australia, the drought in China, wheat prices are expected to go waaay up. Seems like our basic breads and cereals will see some price increases as well. This is no good.
From the Christian Science Monitor:
Everything now depends on this year’s harvest. Lowering food prices to a more comfortable level will require a bumper grain harvest, one much larger than the record harvest of 2008 that combined with the economic recession to end the 2007-08 grain price climb.
If the world has a poor harvest this year, food prices will rise to previously unimaginable levels. Food riots will multiply, political unrest will spread, and governments will fall. The world is now one poor harvest away from chaos in world grain markets.
Demand for wheat from Australia, the fourth-biggest shipper, is strong, said exporter AWB, as buyers from Europe to the Philippines battle for supplies amid prices near their highest level in more than two years.
From Wall Street Journal:
Prices surged to their highest intraday level since late August 2008 after the U.N.’s Food and Agriculture Organization, or FAO, said severe drought in China’s main winter wheat region could pose a serious threat to the Asian giant’s output. The reduced production comes as world markets already face supply strains, particularly for high-quality wheat used for flour.
The dollar touched a record low of $1.5651 against the euro and crude oil reached a record $111 a barrel. Grocery costs are expected to go up further with the rise in the cost of wheat.
And JPMorgan Chase, along with the Feds, are trying to bail out Bear Stearns, an 85 year old investment bank, whose stock lost more than 20% of it’s value in recent days.
CCNWON has a good writeup of stagflation. In it he shows how commodity prices have gone up in recent years yet the wages for the average American has gone down about 2%.
Food prices continue to go up due to more demand for grains, oil prices, and population growth in developing countries. Even my local bagel store had to raise bagel prices to $0.85. Wheat prices surged on Monday this week, and demand for soyoil/soybeans has been solid. Irwin Kellner comments in Marketwatch, explaining “Why it takes a lot more bread to buy dough these days”.