Soaring wheat price headache set to continue

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Soaring wheat prices have caused food manufacturers, farmers and consumers plenty of headaches this year already, and the latest global production forecasts suggest the situation is unlikely to get better any time soon.

With harvests recently having ended, the full extent of this season’s poor weather is becoming clear. Global output is expected to fall by 6% to 651.4 million tonnes this year, as unusually bad weather hit yields and quality in many key producing areas.

Wheat production in the EU is forecast to be down by 4% year-on-year, to 131.8 million tonnes, as much of the Continent struggled with poor weather. The EU’s third-largest producer - the UK - has played a large part in that fall, with British production down to 13.3 million tonnes.

Non-grain commodities rarely top our tracker these days, but extraordinary price rises have propelled cocoa butter to the top of our list this week. Prices have increased by 7.3% to £2,781/tonne over the past month, making cocoa butter in the UK nearly 84% more expensive than a year ago.

Fears over a weather-related rye shortage caused jitters among crispbread makers earlier this year, but a good harvest in Germany - the EU’s biggest producer of rye - have calmed nerves and prices.

Meanwhile, Arabica coffee continues to show the biggest price falls in our tracker. With a good Brazilian harvest expected this season, prices are now 34.4% lower year-on-year, having fallen by a further 7.3% in the past month.

Meanwhile, in the Black Sea region - home to some of the world’s largest wheat exporters - hot and dry weather has caused havoc, halving wheat production in Kazakhstan, to 10.5 million tonnes, and reducing Russian production by a third, to 38 million tonnes.

Production in Ukraine is not looking much better - at 15.5 million tonnes, its figure this year is forecast to be 30% smaller than in 2011. Although an export ban planned for 15 November was recently called off at short notice, the Ukrainian government may yet decide the situation has now deteriorated sufficiently to warrant one after all. In that case, non-traditional wheat exporters, such as India, would suddenly play a much bigger role in the global grains markets - and further price rises would be inevitable.

The global price of milling wheat has already risen by about $2 per bushel year-on-year. With further rises likely, we can expect to be spending more on our groceries next year.

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