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The Forum > Article Comments > Wheat price volatility: panic is baseless and hurts poor people > Comments

Wheat price volatility: panic is baseless and hurts poor people : Comments

By Maximo Torero, published 21/9/2010

Apparent similarities between today’s rising wheat prices and the food-price crisis of 2007-2008 are just that: apparent, not real.

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*In order for world wheat prices to drive up the price of bread, they would have to stay high for a prolonged period*

Hang on, the price of wheat is around 25c to 35c a kg. That is
enough to bake around 2 loaves of bread. So the cost of the
actual wheat has little to do with the cost of the final loaf.

What we do know is that when wheat prices rise, everyone along
the food manufacturing pipeline finds it a great excuse to
increase prices and use the wheat price as the excuse to do it.
Posted by Yabby, Tuesday, 21 September 2010 9:38:16 AM
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But as you so often like saying Yabby that is the system we are dealing with and because of our profit mindset these days nobody wants to make less profit even if a profit is still achievable and of course the old chestnut about obligations to shareholders.

What is Russia to do? It is only natural that exports would stop to ensure local food supply. In Australia we export the best meat and because of exports pay higher prices for the lesser quality. We are certainly suckers but we are not the only ones.

Yet the free market radicals will still put forward the old myths about free trade helping the poor.

Interesting interview on Landline with a Canadian dairy farmer recently.

http://www.abc.net.au/landline/content/2010/s3015809.htm

No system is ever perfect and it won't be when dealing with human nature at its best and worst but there has to be a better way of ensuring security of food supply.

"Well in Canada we know exactly what our price will be, we're regulated in what we're allowed to produce and we don't export so it's a system we've lived with for quite a while now and we're comfortable with.

It has its plus and minuses but it is nice to know at the end of the month what you will get paid as opposed to being on the world market where you fluctuate and it's very difficult to establish business plans moving forward."
Posted by pelican, Tuesday, 21 September 2010 3:29:53 PM
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*But as you so often like saying Yabby that is the system we are dealing with and because of our profit mindset*

It certainly is the system Pelican, but if you crunch the numbers,
profits are only a small part of it. Everyone wants an increased
slice of the pie, costs are loaded up, all along the way. Overtime,
OHS, superannuation, various Govt charges, all the way, everyone has
their hand out. You focus on just profits. So its a flawed mindset.

*In Australia we export the best meat and because of exports pay higher prices for the lesser quality.*

Not so Pelican. In Australia, you can buy the best meat if you
choose to. I helped a bloke set up a home delivery system for
lamb in Perth for instance, where he gets first pick of the best
prime lambs. Home delivered for 9 bucks a kg, as long as you buy
a whole lamb. Hardly a rip off.
Posted by Yabby, Tuesday, 21 September 2010 8:54:43 PM
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We also buy most of our meat direct from the farmer so I know it is possible Yabby but that option is not available to everyone particularly to larger populations in the city.
Posted by pelican, Tuesday, 21 September 2010 9:06:14 PM
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It appears to me that there are those whose aim is to talk the price of wheat down. The more prices increase(London wheat 10% this week) the greater the likelihood of someone professing how huge the world stockpiles are, and in this case how much more prepared we are(?) for mishap. Little mishaps like Pakistan floods...

Maximo, problem 1 - world production tipped to fall to 643 million tonnes.
http://www.weeklytimesnow.com.au/article/2010/09/21/233581_grain-and-hay.html

problem 2 - Who owns the stockpiles?

problem 3 - making wheat profitable to produce in the long term.


Unfortunately for growers the price of Wheat has been subdued by an abundance of production, which until the last few years has more than satiated demand. I read somewhere the "real price" of wheat has fallen 90% since 1800, thats an awful lot of inflation to make up, if a crop falls way below expectation. Prices have increased over 50% lately with only a 5% drop in expected production.
Posted by rojo, Tuesday, 21 September 2010 10:36:31 PM
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You are quite correct Rojo, the real price of wheat has dropped
dramatically in the last 50 years. Through ever larger machinery
and ever more efficiency, farmers are literally mining their
soils to keep afloat and its not sustainable.

What is never mentioned is that fertiliser is around a dollar
a kg, a new header costs well over half a million $, etc.
I've just seen a whole lot of farmers throw well over a half a
millin $ each at their crops, only to lose it through lack of
rainfall.
Posted by Yabby, Tuesday, 21 September 2010 10:51:55 PM
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