Drought and raging wildfires have destroyed one-fifth of the wheat crop in Russia and sent wheat prices soaring around the world.
The fear that Russia, a major wheat producer, will have to cut exports by at least 30 percent is good news for U.S. farmers, who now are getting more money to go along with a bumper crop this year.
That big harvest, analysts point out, should spare U.S. consumers much increase in the prices of bread and other wheat-based foods despite the problems in Russia.
Any price increases will hit consumers hardest in wheat-deficient areas such as the Middle East, Africa and parts of Asia.
The severe drought in Russia is thought to be the country’s worst in 130 years. Most of the damage to the wheat crop has been caused by the drought, but now wildfires are sweeping farmlands in western Russia.
The Associated Press reported that the director of a small state farm outside Moscow said fire destroyed its entire wheat crop one night before the harvest.
“The fruits of the year’s labor of the farm went up in smoke. This is very painful,” Pavel Grudinin, director of Lenin State Farm, said on Russian television.
The drought is also affecting harvests in Ukraine and Kazakhstan, Russia’s neighboring wheat-producing countries.
Troubles with wheat crops aren’t confined to that part of the world. Heavy rains during the planting season destroyed much of Canada’s crop. The Canadian Wheat Board, the marketing agency for the country’s farmers, is forecasting a 35 percent drop in the harvest.
The crop disasters have fed an unyielding price rally. In July alone, prices at the Chicago Board of Trade surged 42 percent, the biggest monthly gain in half a century.
In Chicago, wheat prices breached $7 a bushel Tuesday for the first time since September 2008.
At the Kansas City Board of Trade, the leading exchange for hard red winter wheat, prices are at a 13-month high, closing Tuesday at $6.85 a bushel.
“The Russians have been very active in selling to the world. The drought and fires now mean less will be available this year,” said Joseph Baker, the branch manager for country hedging at the Kansas City Board of Trade.
“The big losers will be consumers where the diets are more pure,” said George Lee, the agriculture fund manager at London-based Eclectica Asset Management. “I don’t think U.S. consumers will notice the price difference very much.”
But U.S. farmers are enjoying an unexpected bump in their incomes.
“The price at harvest time was not that favorable, but we have seen an increase of about $2 per bushel in the past two months caused by the limited supply out there,” said Bill Spiegel, the director of communications at the Kansas Wheat Commission, which represents 25,000 farmers.
Spiegel said the fears of an international shortage were a boon for U.S. farmers who expected a depressed price after recording a huge harvest.
“It is an unusual scenario that we have so much surplus wheat but prices are still rising,” Spiegel said.
The U.S. Agriculture Department has forecast a production surplus of about 1 billion bushels. That diminishes the likelihood of a repeat of the global rally in the cost of grains experienced in 2008, when wheat prices touched a high of $13.84 a bushel at the Kansas City Board of Trade.
