What’s up with wheat prices?
The New York Times has an article today (2/14/2008), “In Price and Supply, Wheat Is the Unstable Staple,” that associates the climbing price primarily with increased demand from foreign buyers experiencing new economic growth and interested in improving their diets.
The Financial Times last weekend (2/9-10/2008) reported that, according to “a hedge fund manager”, “[t]he US has sold too much wheat and will have to import, probably from Canada, to satisfy its domestic requirements.” The manager continues: “This will have a major impact on the rest of the world if consuming countries can’t buy US wheat and Europe becomes the global supplier.”
The idea that America — once called the “bread basket of the world” — may actually needing to import wheat to satisfy domestic requirements boggles my mind. The idea that Europe may potentially supplant the US as the world’s breadbasket does so as well. I know that Europe is prophesied to rise while America declines, but comments like that still catch me off guard at times.
Increased demand is not the only factor. Though neither of these articles stresses the weather angle, the fact is that recent climate-related difficulties, such as drought, have had their effects on the wheat prices, as well. (In related but better news, some rain has finally come to eastern Australia. Let’s thank God for that!)
The Financial Times article says that the price dynamics will probably drive farmers to increase land allocation for wheat and soybean crops in 2008 at the expense of corn. Yet corn is growing in demand, as well. As this Reuters article from a month ago (1/15/2008) reports, “Almost a third of the U.S. grain crop next year may be diverted from the family dinner table to the family car as fuel, putting upward pressure on food prices…”
I cannot help but be reminded of the Third Horseman of the Apocalypse (famine and lack):
When He opened the third seal, I heard the third living creature say, “Come and see.” So I looked, and behold, a black horse, and he who sat on it had a pair of scales in his hand.
And I heard a voice in the midst of the four living creatures saying, “A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not harm the oil and the wine.”
(A denarius was about one full day’s wages at the time. A quart is, well, a quart!)
Does all this talk of high grain prices mean that the Third Horseman is beginning to move in for the long haul, toothbrush and pajamas in hand, and prices are on a one-way trip? I’m not one to say so. The Times article points out that while prices are higher nominally than any time since 1948, when adjusted for inflation prices were higher in the mid-70s. (A local max according to the Times’ graph, showing what an anomaly the 70s were.)
Still, if he isn’t moving in yet, I hope you’ll forgive me if I look at this confluence of factors and lean towards the opinion that at the very least he may be standing outside asking the our doorman if he has the right apartment building…
[UPDATE, 12/28/2009: This post still tends to get a lot of traffic, almost two years later. Consequently, as I was responding to a comment today it hit me that many of you coming across it might be interested in the television program we have that explains the meaning of the Four Horsemen (actually, the Five Horsemen, as the show demonstrates!). The complete program is available online for streaming or downloading and can be found here: "The Four Horsemen of the Apocalypse."]