Milling & Baking News - May 3, 2011 - 7

Wheat vies with oil for role in global economy
ven though it’s obvious for grain-based foods also are viewed as more complex, if for no reason executives to worry about the impact of cur- other than the key role weather plays in the size rent high ingredient prices on the industry, of annual wheat harvests, a factor unknown in parallel attention is owed energy markets that not oil. Yet, politics also loom as a significant force in only contribute to similar cost and pricing pres- wheat. Nothing underscores that more powerfully sures but loom as potentially powerful influences than the manner in which recent gains in wheat affecting demand for bread and other flour-based were precipitated by actions taken by Russia’s foods. It may even be claimed that the outlook for leadership to protect domestic supplies by halting grain-based foods is as tied to the behavior of oil exporting. A disappointingly small 2010 harvest due as it is to fluctuations in wheat. Both markets are to unfavorable growing conditions gave Moscow subject to and are responsible for economic forces the excuse for taking actions generally regarded as affecting the well-being of a broad range of indus- politically motivated and irresponsible in light of tries, none hardly more directly than grain-based resulting food shortages. foods. The difference this time is that global prices Uncertain prospects for Northern Hemisphere for both skyrocketed into nearly uncharted terri- winter wheat, related to unfavorable weather in tory, which in turn poses a massive challenge that is places like the American Great Plains, emphasize different from the past. how weather affects the wheat It may be claimed that the That difference is best supply. Yet, weather also plays a outlook for grain-based foods is analyzed in the way that the key role in energy markets as a as tied to the behavior of oil as two commodities are moving demand, not a supply force. it is to the ﬂuctuations in wheat. on similar trajectories, whereas When it comes to the state past courses often were sharply divergent. Sure, of the economy and the commodity that has earlier times included similar parallel moves, but for the greatest impact on consumer demand, the the most part the opposite is the case. Rather than immediate inclination is to say oil prices and their dismissing parallel moves as temporary blips, their direct tie to the cost of motor fuel have the reins. repeat from only three years earlier is startling. This is Current gasoline prices are credited with curtailing especially so when it is realized that both approached some consumer spending, not just in America but near record levels at times when many respected in other parts of the world. Thus far, this damper on analysts contend that supply-demand conditions consumer buying is not felt in lesser spending on hardly justify such strength. the products of grain-based foods. But if fuel prices Both have displayed sensitivity to developments continue near present levels, grain-based foods will that on their surface might not appear so threatening. know their impact. Much of the recent strength in oil is attributed to the Acknowledging that high oil prices threaten revolution interfering with Libya’s oil exporting. Yet, economic well-being certainly does not mean that that single country is a relatively small supplier. That wheat, along with other grains like corn and soybeans, interruptions in Libyan oil exports could be blamed for are without power in influencing the future course of recent price gyrations reveals a characteristic not often the U.S. economy. Wheat moves have consequences attributed to a global market with the exceptionally well beyond their effect on the cost and pricing broad supply-demand reach of oil. As seems to be the structures of grain-based foods. They are important to current case, oil markets are more often affected by much of the world’s population, and prices that put politics than by bumps in supply, which are rare for these grains beyond the reach of millions of people this commodity’s known availability. are perhaps even more worrying than oil in creating Wheat’s supply-demand issues are similar, but political turmoil and even revolutions. MBN MORTON SOSLAND, EDITOR-IN-CHIEF
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