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Recent price moves in wheat
SilverStreet comment | August 9 2010
The price of wheat has soared recently and is now 40% above the last 12 month average. This increase has arisen because of droughts in the Black Sea region and exceptionally high rainfall in Canada.
Unlike the price spikes in 2008, global inventories of wheat are significant at around 30m tonnes and this should approximately cover the Black Sea shortfall. Thereafter prices will be very sensitive to any other shortages arising globally. The Canadian wheat crop is expected to be around 17% lower than last year. Additionally there are potential problems with locust plagues facing wheat farmers in Western Australia.
We expect wheat prices to give up some of their recent gains in the near term as inventories are sold down. Thereafter we expect wheat prices to trend upwards over the next 9-12 months given the tight nature of global supplies.
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