Do wheat price increases warrant policy measures to curb speculation?
In early August wheat market prices hit a two year high, having jumped by over 50% since June due to reduced Russian, Ukrainian and Canadian production. Prices reached a peak when Russia imposed a wheat export ban. The Ukraine later imposed tight export quotas for wheat and barley. However there are bumper yields in the US and global wheat stocks are high. The FAO reduced its forecast of global production in 2010 from the June estimate of 676 million tonnes to 651 million, but said supplies are adequate to meet demand. ‘Stocks held by traditional wheat exporters … remain ample’, the FAO announced. It should also be noted that in June, wheat prices were at their lowest since 2005. Increased volatility is more evident than any general trend to higher wheat prices. The question nevertheless arises: what is driving the price changes? Jonathan Barratt, managing director of Commodity Broking Services in Sydney, identified ‘two things driving the market, fear and fund buying’. This is leading
