Global Wheat and Rice Prices increase faster than 2008 Commodity Boom due to Record Drought In Russia and Floods in China

A  Record Drought in Russia and Worst Floods in China since 1998 are driving up wheat and rice prices up more steeply than in the commodity bull run in 2008.Secular factors like Globalization of Agriculture has already driven up food prices around the world,on top of this such seasonal factors will drive the prices even higher.The worst affected will be the most vulnerable poor sections which live on the brink of starvation.Food prices rise in India has already led to widespread distress in 2009 and this adverse scenario should continue in 2010 as well.

Russia’s Worst Drought in 50 years leads to Steep Rise in Wheat Price

Russia has not only seen its existing harvests decline but also expects that winter sowing will also be affected.Wheat prices have climbed 38 percent in July, as Russia is one of  the biggest producers and exporters of Wheat.The production is expected to decline by almost 30% in 2010 leading to a sharp fall in exports.The increase in wheat prices has been sharper than in 2008 due to fears of shortage of global supply.

Worst Russian Drought in 50 Years Threatens More Crops, Sowing – Bloomberg

Russia’s worst drought in at least 50 years, which already drove wheat prices to the biggest jump since 1973, will continue in August and threaten more crops and winter-grain sowings, the national weather center said.The dry weather forecast for the central areas of Russia’s European regions will damage crops including sugar beet, potatoes and corn, the Hydrometeorological Center of Russia said in a statement on its website. Winter-grain plantings scheduled to start in August in the north eastern areas of those regions will be hampered by dry soil, the center said.

“This is the first time in 50 years we’ve seen the combination of such a long period of abnormal heat and both atmospheric and soil drought,” the center said. Russia’s Grain Union has said the drought is the worst since record-keeping started 130 years ago.Wheat jumped to a 22-month high in Chicago trading yesterday, extending a 38 percent advance in July that was the biggest since 1973. Prices in Russia rose 19 percent last week, according to researcher SovEcon. That’s faster than at the peak of the global food crisis in 2008, according to the Grain Union.

China’s Floods leads to 16% Rise in Rice Prices

China like Russia has been severely affected by adverse weather conditions.China’s worst flooding since 1998 threatens to cut the rice production which has led to increase in global rice prices already.China produces 1/3rd of the world’s rice or 137 million tons which might be reduced by 10% due to these floods.Rice prices are expected to rise further due to these floods which have killed almost 1000 people .Prices of pork which is heavily consumed in China have also risen steeply leading to fears of increased food inflation.

China’s Worst Floods Since 1998 to Cut Farm Output – Bloomberg

China’s worst flooding in more than a decade may cut production of rice, cotton and pork in the largest producer, boosting prices and hampering government efforts to keep inflation under 3 percent, analysts said.

The world’s most populous country grows almost a third of the globe’s rice and cotton and produces about half of its pork. A decline in output may support global prices. Rice has climbed 15 percent in Chicago since June 30, while cotton has advanced 26 percent in the past year in New York. The floods have also boosted food prices in China, the largest consumer.

The potential impact of natural disasters on grain supply may be a problem for the economy, the China Daily reported today, citing Zhao Xiaoyu, vice president of the Asian Development Bank. The output of grain harvested this summer fell for the first time in seven years, the report said.

Rice production may drop by about 10 percent this year because of floods, the industry web site cngrain.com said July 20. Consumer prices advanced in May at the fastest pace in 19 months, gaining 3.1 percent, the National Bureau of Statistics said June 11. Inflation cooled to 2.9 percent in June.