Wheat Prices

Few commodities are impervious to the 'China effect' - the upward pressure on prices from rampant demand in the world's bounciest big economy. Coffee is one - few Chinese drink the stuff. Wheat has been another - China is the world's biggest producer, remaining largely self-sufficient. That could be about to change.

The UN Food and Agriculture Organization reported that rain and snowfalls were well below average in eight wheat-growing regions. The current drought could be the worst in 200 years. The International Grains Council estimates world wheat production in 2011 will be 647 million tonnes, much lower than in the two years before. If China starts buying, importers may step up efforts to secure wheat and exporters may impose more bans.

Wheat prices in Chicago jumped nearly two percent last Tuesday when the UN FAO issued an alert that China's crop was in trouble, and prices remain near their highest level since 2008.

GB