The Great Wheat panic of 2007 saw global prices shoot up by over 92% during the year. Rice and corn prices also rose as sharply. Food riots have been reported from Kolkata to Namibia, Zimbabwe, Morocco, Uzbekistan, Austria, Hungary and Mexico. According to Food and Agricultural Organization 854 million people go hungry around the world. This situation is going to worsen in 2008.
Global consumption of wheat and rice has outstripped production for the past 7 years running except in 2006-07.Production is growing but population is growing faster. Global wheat stocks were down to 107 million MT in 2007 compared with over 197 million MT in 2001; rice stocks were just 71 million MT compared with 136 million MT.All this means that the future supply of both wheat and rice is becoming more uncertain.
In India food grain production is stagnating. Wheat output was 72.8 million MT in 2002.This year it is estimated at about 74 million MT.Rice output was 93.3 million MT in 2002 and this year it is estimated at about 90 million MT.Meanwhile the population has increased by about 88 million. So India needs to import foodgrain.This in turn will fuel global prices. According to grain economist Mike Woolverton as soon as India bought 795000 MT of wheat at a record price of $ 389.45 in August 2007, wheat futures in Europe rose by 70% on expectations of more orders.
In 2007 the world supply of wheat was affected due to drought in Australia, a freeze in US and lower production in Ukraine. The price surge was also fuelled by the new US law saying the use of ethanol for automobiles should be doubled to 15 billion gallons by 2015.Ethanol is made from corn. So corn prices surged.
According to Greg Wagner with global economies continuing to expand the demand base has been increasing while the supply has been decreasing. As a consequence prices must go high enough to cut back on demand otherwise there will not be any wheat left.