High temperatures in Russia complicate supply chains of food around the globe
Is it global warming or just a bad year? Record temperatures in Russia this summer triggered Russian government’s response of stopping the export of wheat. As Mr. Putin put it in Russian – reserves don’t hurt ones pocket. As we live in the all connected world this decision caused significant waves in food supplies and futures trading. The decision immediately triggered a sharp rise in the value of futures for delivery of wheat in the world. At the Chicago Mercantile Exchange, the December futures on wheat rose by $ 0.6 - to $ 8.155 a bushel. The global prices on wheat rose 7.3%.
The ban comes as no surprise given the weather conditions in the grain producing areas of Russian Federation this year. In a very unusual heat wave the temperatures rose and stayed at record levels for the last 6 weeks causing damage to the crops. Wild forest fires have complicated the situation even further. As a result, the prices on wheat reached two-year highs causing fears of serious inflation in food prices around the world.
It is hard yet to determine the magnitude of the problem. It is clear though that other commodities like corn, sugar, coffee, barley will also be impacted as Russia is the third largest exporter of wheat.
The ban on Russian wheat exports will go into effect on August 15 and stay on until the end of the year. Wheat producers in the other 2 top wheat exporters, Canada as number 2 and USA as number 1, might actually benefit from this gap left by Russia in the wheat market. Other wheat producers, Kazakhstan and Ukraine, are yet to declare their intentions.
The will have calming effect inside Russia as this measure will help keep the price of wheat lower on the internal market, which is the main reason for the ban.
Comments: 0; Published: August 05, 2010;
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