A scary look at wheat prices
Commodity prices have been soaring all around, but the recent movement in wheat prices is really shaking the market. Since the beginning of the year, Wheat has nearly doubled to its highs in the twenties. A weak dollar, demand for ethanol and emerging markets around the world are putting the strain on natural resources.
Wheat prices affect nearly every product on the shelves, from the basic flours to pasta and even alcoholic beverages. Wheat is at the base of most foods. Breads, pastries, cakes, are all affected by an increase in the price of wheat.
Wheat has historically traded in a tight trading band from $3 to $7 a bushel, but added demand and a weakening currency has sent the price of wheat skyrocketing. The increase in price is likely to start affecting shoppers very soon in almost every product available.
Rapid increases in the price of any commodity is usually due to an increase in the money supply. Core inflation numbers released from the FED are still pinning inflation at just a 3-4% clip while other inflation statistics that include energy and food are much higher. This increase in the price of wheat is scary as its likely to affect the shopping bill by a large percentage. Bakeries are already feeling the pinch, sending the price to the customer is dropping demand for pastries and other treats.
There is really no investment to be made in wheat, it should just go to show the effect of inflation on commodity prices, especially food and energy.
