To begin with, world wheat production has been for years far below what is required for decent consumption and reserves, limited by decades-long lack of land and water improvements, and the "Monsanto factor" of seed control. Now, wheat stocks and export volumes are dropping, under the pattern of inaction enforced on nations, to prevent them from daring to intervene to assist more food production and ban the hyperspeculation. In Europe, wheat-for-biofuels has not been banned. In the United States, the Obama Administration is carrying out the London imperial famine policy to the extreme, with biofuels from corn, soybeans, and sorghum.
World wheat production this year, if fortunate, is expected to barely top the disastrously low harvest of the 2010/2011 season, when the Eurasian Wheatbelt was hit by drought and heat, suffering huge losses.
There are all kinds of instances of skirmishing to line up wheat supplies. This week, Japan lessened its standards for noodle wheat imports from Australia because of shortages. Australia is the source for Japan's preferred ANW (Australian Premium White) for noodles, and there is a significant shortfall. Western Australia, the leading wheat state down under, is expected to produce 52% less (than an averaged volume) in the current marketing year, ending Sept. 30, for a low harvest of 5.6 mmt. Noodle wheat will be down by half. South Korea has likewise cut its quality standard for noodle wheat imports already.
The figures from the latest U.S. Department of Agriculture world report of Jan. 11, even discounting for the now-notorious USDA error factor, show the dimensions of the crisis (USDA "World Agriculture Supply and Demand Estimates"):
* WORLD WHEAT OUTPUT SHORTFALL, went from a low 652.3 mmt (2010/11) up to 686.5 mmt (2011/2012), with good weather in Eurasia; and now is back down, if lucky, to 655 mmt (2012/2013).
* WORLD WHEAT "STOCKS" (meaning stockpiles) plunge. Since yearly world consumption levels of wheat have been more than what is being produced, any stockpiles are depleting drastically. The USDA figures for wheat stocks, as of end-of-the-season, are: 198 mmt (2010/2011), down to 196 (2011/2012), down to 177 mmt this year. Export volumes are declining.
Wheat futures prices are spiking on the exchanges. For example, on Jan. 15, wheat futures jumped up 2 percent on the Chicago Board of Trade in one day, reaching at one point, $7.89 a bushel. The prolonged dryness makes parts of the U.S. wheatbelt extra vulnerable to winter-kill of the dormant wheat (planted in the Fall, and harvested around June).