Wheat prices are soaring on global commodity markets following Russia's ban on wheat exports. But experts currently do not expect a repeat of the price spikes that sparked food riots in several countries in 2008.
Russia was the world's third-largest wheat exporter last year, but this year's severe drought has destroyed at least 20 percent of the harvest. Global commodity prices for wheat have been climbing since June as a result.
Russia's announcement that it would ban exports added to concerns about world supplies and pushed prices higher still.
But globally, there is no shortage of wheat.
"Here in the U.S., it wasn't but three or four months ago that we were bemoaning what an excessive oversupply we had of wheat," says agricultural economist Dan O'Brien at Kansas State University.
World wheat supplies are strong after two years of record harvests, according to the U.N. Food and Agriculture Organization.
Commodity markets have been volatile in recent years, and the price spikes of 2007-2008 may be fresh in traders' minds. But Maximo Torero at the International Food Policy Research Institute says there is a risk that markets will overreact.
"And that's what is happening," he says. "It is overshooting. And what we need to do is to try to calm that and make it go to what real market fundamentals are saying."
Fundamentals including energy prices and demand for biofuels are not putting as much pressure on prices as they did when food costs spiked two years ago.
While the loss of Russia's wheat is significant, Torero does not expect wheat prices to remain as high as they are now. And consumers may not feel the effects immediately because there tends to be a lag between when commodity prices rise and when the impacts reach shoppers. But if prices stay high, the impact will be significant, says Food and Agriculture Organization economist Abdolreza Abbassian.
"The longer it takes [for prices to come down], it will increase the import bill of poor countries," he says. "It will have major repercussions on the poor, whether the poor in the U.S. or Africa. Poor people spend a lot of their income on food."
Abbassian says if Russia's drought continues, it may affect next year's harvest as well. That would open up opportunities for others to make up the shortfall.
Experts say today's high prices may encourage wheat farmers in other countries to increase their production.
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