Wheat prices herald a problem

Lenin called grains the "currency of currencies."

Worst conditions in 27 years for winter wheat in the US. Some are invoking the "Dust Bowl" to describe the current environment in the US. Surprisingly, the cereal crop with the greatest price move this year is wheat not corn even though news reports focused on corn during the summer. 

The wheat market is a global market and with stocks to usage forecasted to decline further this year to about 24% we are seeing more price increases. The US is in bad shape, but so are other bread basket areas - Russia, Ukraine, Australia, and Argentina. The 2012-13 season is looking to be 661 m tonnes which is below the current consumption of 688 m tonnes. Places like the Ukraine and Russia which have served as residual exports on the wheat market will be subject to export restrictions. We are seeing these countries actually accelerate corn exports and withholding wheat. 

Wheat prices are near 2008 highs and are more than double the price from ten years ago. This will be the commodity market that will show some of the most price action in the next three months.