[nocar]

When I first heard about peak oil ten years ago I started to keep track of the oil price (Of course it dipped down to under 12 USdollars/barrel right after that, in 1998) They guy who talked about PO said that an oil crisis would start in 2003.

Then in 2002 I started to think that food prices would be the real important thing, so I started to note the wheat price. Wheat, as I understand it, is the most important crop for direct human consumption, worldwide.

In 2002-2005 wheat varied between 300 and 400 USdollars/bushel. From Nov 2006-May 2007 it has been around 500 USdollars/bushel. In the last few days, it has reached over 600 USdollars/bushel. It is a record, at least in a five year period. I have no idea what it was like earlier.

Anyone with more insight into wheat prices?

It is really surprising to me that such a large price increase in such an essential commodity is totally uncommented on in business news. (Not that I follow more than the national news on Swedish TV and the headlines on the Ekonomi-section of the major Swedish paper, Dagens Nyheter. Actually DN had a daily commodity price table including wheat for years, but just the last month, when it started getting interesting, has taken out all the food commodity items, as part of a new page design. I also read TIME and a Canadian weekly, Mcleans)

Do all economists think that food prices on the world market are not important? Why?

Please help me understand wheat prices and the lack of interest.

nocar

[nocar]

I want to add to my last post that I also check on Bloomberg, to see commodity prices. Not much comment about the price increase in wheat there, either.

nocar

[benzoil]

CNN Money: Wheat Hits 11 Year High

Some analysis. The prices are attributed to the drought in the Ukraine and rain affecting the harvest in the SW US.

[lawnchair]

There is no doubt some pressure from ethanol/biodiesel. The number of plants springing up is impressive. I live in a zone of Kansas that can go corn or winter wheat. If they've built an ethanol plant nearby, it's a whole lot less risky to plant corn. Plant corn, harvest corn, sell on a stable contract to the nearby distillery. Wheat on the other hand, you're playing roulette with how the weather is doing this year in Ukraine, Brazil, and Henan. Prices have to go up quite a bit to make the risk attractive. I'm seeing a lot of corn.

[nocar]

I suppose that in so far as the record is weather related it could be interpreted as a freak event or as a serious effect of climate change.

In so far as it is due to competition with biofuels, it could be interpreted either as an effect of combating climate change or as an effect of mitigating PO.


Noone seems to have commented on the effects of more expensive wheat for people's consumption.

nocar

[DoubleD]

Grain has definitely gone up and is likely to have further (severe) price pressure from drought, the Easter freeze that wiped out a portion of winter wheat production, competition of land for fuel (ethanol), petroleum inputs (fertilizer & insecticides) and fuel for shipping cost increases, and finally the steady state decline of soil from intense and unsustainable growing methods.

It's not good.

Here is a good article on the subject that was published relatively recently.

http://www.energybulletin.net/17261.html

[nocar]

DoubleD, yes, the article by Lester Brown from a year ago (your link) is exactly why I think this is important. And that is why I am surprised that record wheat prices make so few ripples in the news stream.

nocar

[Twilight]

$this->bbcode_second_pass_quote('nocar', 'N')oone seems to have commented on the effects of more expensive wheat for people's consumption.

[holmes]

I do not eat wheat or dairy. Let it go up and let them die off if they can not afford it. Maybe wheat and dairy is creating these massive hanging paunchy bellies I see on "men" and "woman".

[jboogy]

Twilight made boogy laugh!I was wondering why some of the farmers around me had planted wheat this year. Me and the wife didn't even know what the hell was growing till I asked my hay guy what it was. It's weird though how real farmers can grow just about anything anywhere . We'd had very little rain and I never saw the fields around me either fertilized or watered but damn if this thick rich wheat didn't sprout like a Watusi with a thyroid condition.they just harvested it last week.

[nocar]

Wheat is now around 650 cents per bushel.
And I apologize for the mistake in my first post, which nobody commented. I wrote 'dollars' per bushel. In a sense, that noncomment illustrates my point that we are curiously disconnected from the basis of our daily food, here specifically bread, pasta, cookies and pies and much more.
Of course, wheat is animal feed too.

nocar

[nocar]

Wheat has now reached 700 cents/bushel, according to Bloomberg.com/market data/commodities.

nocar

[sjn]

$this->bbcode_second_pass_quote('nocar', 'W')heat is now around 650 cents per bushel.
And I apologize for the mistake in my first post, which nobody commented. I wrote 'dollars' per bushel. In a sense, that noncomment illustrates my point that we are curiously disconnected from the basis of our daily food, here specifically bread, pasta, cookies and pies and much more.
Of course, wheat is animal feed too.

nocar

[OilIsMastery]

http://www.resourceinvestor.com/pebble.asp?relid=16216

$this->bbcode_second_pass_quote('', 'A')SPEN (ResourceInvestor.com) -- Famed Wall Street legend Jim Rogers told institutional investors at the International Oil & Gas Investor Forum in Aspen, Colorado, to move toward commodities – and fast.

“If you’re good at buying stocks, do so, otherwise you’re better off investing in commodities,” said Rogers.

In a presentation that went around the world, Rogers examined the U.S. currency, stocks, bonds and, of course, Asia to explain his viewpoint. Overall, he said commodities are in a bull market and oil & gas could be investors best bet.

Picking up where Frank Holmes of U.S. Global Investors, Inc. left off in the morning, Rogers wasted no time in hitting upon China and its soaring economy, telling listeners to “teach your kids Chinese.” He painted a picture of insatiable demand for commodities in the country, fueled by an enormous population, thriving economy and a will to succeed.

“China is the next great country of the world, like it or not,” he began.

According to Rogers, China has the best capitalist market in the world right now. Asians are willing to work as hard as they have to in order to become as prosperous as those in the West. They don’t ask how many sick days they will get, or what holidays they will have off; instead they ask when they can work, Rogers said. And they work for far less than we do.

“Most Chinese don’t have electricity, they’re going to get electricity,” said Rogers, adding that the power will obviously have to come from energy sources like oil & gas.

Rogers next tackled the topic of the U.S. dollar and where it’s headed – a popular topic with analysts these days.

“It is now a terribly flawed currency,” he said.

The U.S. now owes the rest of the world $8 trillion, and adds on average $1 trillion every 15 months, according to Rogers. The total U.S. debt remains at about $43 trillion.

Future Federal Reserve Bank Chairman Ben Bernanke, as most of us have already heard, has said that the Fed controls the printing presses and will run them as much as needed to keep the economy going. And, as most of us already know, this quick fix has serious long-term repercussions, mainly mass inflation.

Even Asian banks – the five largest investors in U.S. bonds – are becoming concerned, Rogers added.

So with this said, where should investors put their money? You guessed it: commodities.

“You have to find a way to make money from it,” Rogers urged.

He listed the three possible avenues investors can take.

1. Bonds
2. Stocks
3. Commodities

Rogers plainly said the bond market is “not a place for your money.” A meager 4% gain per year is not going to do it, he said.

Rogers said that stocks would continue to fluctuate in the market, and for the most part, investors would not get the gains they seek.

But commodities…

“Most people in the world don’t know that you can buy and sell commodities,” Rogers explained.

He said when people do catch on, this could launch the bull market for many years. Rogers added that in his experience, the shortest bull market in commodities lasted 15 years, while the longest lasted 23 years.

“It takes a long time for bull markets to come on stream and a long time for people to take advantage,” he said. And Rogers said the oil & gas sector could be just the place to take advantage.

According to Rogers, all the great oil discoveries were made over 30 years ago. Reservoirs in Alaska, Mexico and the North Sea are in decline, he said. Not to mention, nobody really knows how much oil Saudi Arabia really has.

“Since 1988, Saudi Arabia has said it has 260 billion barrels of oil – that’s 18 years of the same number!” Rogers said.

He added that the U.K. has been an importer of oil for years, and China has recently gone from an exporter to an importer. Although Russia has huge amounts of reserves, it hasn’t put forth the work to get wells online, Rogers said.

“When supply goes down and demand goes up, that’s a bull market,” he frankly put. “Unless someone discovers a substantial amount of oil soon, the price is going to keep going up.”

Aside from oil & gas, Rogers did add that agricultural commodities could prove very valuable as well. He said sugar, wheat and soy haven’t moved nearly as fast as the metals and are far from all-time highs.

“By 2018, everyone is going to be investing in commodities and everybody is going to be screaming that commodities are going to go up forever,” Rogers concluded.

[dorlomin]

When figures for the net global harvest for this year become clearer then factors such as droughts in Ukraine and Australia and flooding in Western Europe may be easier to asses in terms of what impact they have had on supply side.

The tremendous growth in Ethanol for corn has seen (apparently) wheat being used as a substitute in some uses of corn (such as animal feed).

Another less important factor in longer term projections will be the price of the dollar.

Corn is how I have ended up on here. I had read a couple of articles on high corn prices related to ethanol and started reading around a couple of weeks ago. It has been an eye opening experiance.

I very strongly feel that food inflation will trigger the first real social unrest from peak oil and trigger it soon. Many people talk of people living in the third world on $2 a day but dont realise most of them now are not subsistance farmers but urban poor, and 3x the times of food will drive many to hunger.

For the poorest countries, as civil disturbance and wars break out, central governments will have less money for oil meaning less ability to respond with aircraft and large troop movements. It will push another few states into failed states, especialy in Africa where the Westphalian nation state has no real roots and alread disintegrating in many places. Take away fuel for food trucks and add food hikes and you have a very nasty situation brewing.

[nocar]

$this->bbcode_second_pass_quote('', 'M')any people talk of people living in the third world on $2 a day but dont realise most of them now are not subsistance farmers but urban poor,

[OilIsMastery]

http://www.investmentu.com/IUEL/2005/20050725.html

$this->bbcode_second_pass_quote('', 'I')f you look at wheat, the amount of acreage under cultivation for wheat is actually in decline over the past 25 years.

[pip]

I grow dryland wheat here in Tx. From what I can remember, the factors raising the price over the last several months were the Easter freeze, poor harvest conditions in the US, reduced acreage in Canada's spring wheat, poor weather in Europe/Russia.

My area of Texas was in a sweet spot in that Easter freeze did not harm the crop and we had a very wet winter and spring. As a result the wheat crop here was the best in history for many farmers. That coupled with the high prices meant a lot of farmers made a lot of money. You could have made 75% of the value of the land with one year's crop this summer.

[Denny]

I real terms, the price of wheat is still fairly low, compared to the past century high water marks.

See Farm values in Kansas

Wheat was $0.57 per bushel in 1900, a time when $15 per week (6 day week, not 5 day) of labor was a good wage, or just $0.30 per hour. Wheat prices peaked at $1.29 per bushel in 1920 and then declined again. Prices decreased back to $0.57 per bushel in 1935 and then increased from there until the 1954 peak of $2.12 per bushel. From 1954 to 1969, prices declined to $1.35 per bushel. Since 1969, wheat prices increased to $3.54 per bushel in 1982, declined to $3.01 per bushel in 1992, and increased again to $3.73 per bushel in 1997.

If we matched the 1900 bushel price today, in terms of a work hour equivalent, it would likely be about $25 or more. Bear in mind, even at that high price, it owukld only represent about 75 cents within a laof of bread. There are 60 pounds of wheat in a bushel. All of this is small comfort to those in thrid world nations.

[dorlomin]

This projection seems to indicate a relatively good world wheat crop. Link





But world stocks are looking a touch iffy. Link



According to this British site. Estimating world production at 621 MT for 2007

These aproxomites seem to be confirmed by a second site here, although they may use the same primary source.

So one has to say it definently looks like being a demand driven price. That means China and biofuel, more than lack of wheat due to global warming or other weather causes. (IMHO) [unless someone can give me more up to date figures for the harvest]