Friday, May 16, 2008

Wheat Prices Plunge By 41% in Three Months

On a recent CD post "As Share of Disposable Income, Food Is Still Cheap," Machiavelli999 left a comment about the falling price of wheat. The graph above confirms his observation - spot wheat prices have actually fallen by 41% in the last three months from $9.36 per bushel in February to $5.54 per bushel in February, and prices are now at their lowest level in almost a year (since June 2007 when wheat was $5.34).

Updated: Prices have fallen by 41%.

7 Comments:

At 5/16/2008 10:22 AM, Anonymous Fred said...

More importantly for its global impact, rice is coming down, too.

Someone pulled away the pot of gold at the end of the grainbow.

 
At 5/16/2008 11:37 AM, Blogger bobble said...

thanks for the chart. that's good news.

recently, i've read analysis that purports to show that the rise in oil is not caused by speculation, because there has been no corresponding increase in oil storage. ie if all oil is not being consumed, then it would have to show up in increased storage.

that 'seems' right, but when i look at the large amount of new money flowing into commodities, there has to be some 'speculative' effect.

any comments on that?

 
At 5/16/2008 11:45 AM, Anonymous Anonymous said...

"because there has been no corresponding increase in oil storage."

They are storing it in the ground by not pumping it.

 
At 5/16/2008 2:55 PM, Anonymous Anonymous said...

Bobble, the Commodity Futures Trading Commission featured a very interesting discussion on the speculative effect on agricultural commodities in late April. It took most of a day, but the early discussion by CFTC staff economists is particularly worthwhile. You can see a webcast
here
if you want to follow up. Many interesting things are happening in the commodities markets. People point to speculators, but there may be more to the story.

A4

 
At 5/16/2008 3:47 PM, Blogger Bret said...

Interesting math. I think that most people think that if something drops by 70% that the new price would be 30% of the original. Yes, 9.36/1.7 is more or less 5.54, but is a 70% drop really a typical of stating that?

 
At 5/17/2008 1:13 PM, Blogger Walt G. said...

Professor,

Why are you using a recent percent change over time methodology to portray good news (wheat) while in the previous post you put a spin on gasoline prices by comparing the U.S. to other country’s gasoline prices? Is reporting recent percent change over time of gasoline prices in the U.S. too pessimistic for the Goldilocks’ economy?

Like you, I agree that the U.S. is in a global economy nowadays and we will have to adjust to that exciting reality; however, it is going to be a long painful process for many people. That fact should not be ignored. As always happens, there will be winners, and there will be losers when the economy shifts. The winners will be the people who can quickly adapt to change and see the new opportunities the economy presents; the losers will be fewer as time passes and people realize a permanent shift has occurred that demands their acclimatization.

What about those who stay at the bottom? That’s always the case in a capitalistic society where people are rewarded for education, hard work, and ingenuity.

 
At 5/17/2008 9:29 PM, Anonymous Anonymous said...

Question - was the peak price of wheat driven by speculation or a result of the normal supply vs. demand balance or was something else going on here

 

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