Tuesday 20 February 2018

Wheat prices' spike unlikely to hit consumers in the pocket

Peter Flanagan

THE CURRENT spike in wheat prices should not have any noticeable effect on consumers in the near term, according to analysts.

Russia's decision to ban wheat exports for the rest of the year after a drought wiped out much of the annual crop has sent shockwaves through the markets.

US wheat futures with a delivery date of December this year have fallen back from the highs of last week but are still trading at about 50pc more than they were at the end of June.

There have been fears that the tighter market will inevitably lead to higher prices for bread, flour, beer and other foods but Killian Murphy at Goodbody stockbrokers believes that as long as the ban only lasts until year end, then there should be a minimal effect on consumers.

"Certainly most of the big players would have already secured their supplies for the rest of the year.

"It would be unusual if a major company was buying wheat forwards now with a value date before the end of 2010. There may be smaller retailers or businesses that could suffer disproportionately due to rising commodity prices but they should be few and far between," he said.

The last significant jump in food-related commodities in 2008 led to riots in developing countries and increased prices here, but Mr Murphy doesn't see that happening at this stage.

"As long as the ban remains a short-term measure there should be little impact on global food prices. If it continues into next year, however, then there is a chance prices could start to go up.

"Having said that, inventory levels are much higher now than they were two years ago and supplies of wheat replacement foods such as rice are far more abundant," he added.

Irish Independent

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