Wheat price spike spells trouble for reliant Middle East states

Already fragile Middle Eastern governments are bracing themselves for the fallout of increased costs for wheat, The Wall Street Journal reports.

The grain had shot up at least 17 percent this week as of Wednesday evening, largely as a result of inclement weather. U.S. crops endured soggy weather while Western European fields suffered from drought conditions, which force up prices and add tension to an already pressurized situation.

Kansas, the largest winter-wheat crop in the U.S., is suffering from drought conditions that threaten the supply, Bloomberg reports. Approximately half of Kansas is in the throes of a dire drought, which is almost three times as much as the 18 percent from two weeks prior.

"Some of the wheat areas, especially in south-central and southwest Kansas, are seeing the same type of problems that Oklahoma and Texas are, as far as damage to the winter-wheat crop," Brian Fuchs, a climatologist at the U.S. Drought Monitor, told Bloomberg. "There's been quite a bit of acres that are being abandoned, meaning they are not going to even try and harvest because of the lack of a viable crop.”

This year has seen popular revolutions sack the leaders of Tunisia and Egypt, which were partially influenced by mass opposition to rising food prices. Those anti-government protests spread to Yemen, Bahrain, Syria and Libya, among other states reliant on the grain to feed their nationals.

On Wednesday, wheat futures scaled in price by 53 cents, a 7 percent rise to $8.17 per bushel. That lift represents the largest single-day price increase since late last year. The commodity has risen 91 percent in less than 12 months.

Wheat markets last spiked in Summer 2010 when Russia endured a severe drought. Since then, the price has remained elevated and this year's weather issues threaten to push prices even higher by slashing supplies.

Though some farmers are enthused about the money-making opportunity when it comes to exports, a threat exists to consumers, like those in the Middle East. The grain is considered the geographic area's most significant dietary staple, given its nutritional contribution to bread, pasta and couscous, all of which are considered cheap nutrition.

"It is a situation that a lot of countries in the region are concerned about," Julian Lampietti, the leader of a World Bank Arab food security study, told the publication. "This system is not very sustainable."

The globe's top consumer of the grain is Tunisia as its nationals eat more wheat than any other nation per capital. Each person eats 478 pounds annually, more than twice as much as the 177 pounds eaten by Americans.

Algerians and Egyptians also consume more than twice as much wheat as Americans, according to the United Nations Food and Agriculture Organization.

Also plaguing many Middle Eastern nations is the inability to grow wheat. Thus they are forced to purchase the commodity from other countries and then apply discounts when passing it on to their respective poor, malnourished communities.

For that reason, Egypt - who sacked 30-year autocratic leader Hosni Mubarak in February after 18 days of protest - has informed donor nations that it will require $13 billion in developmental aid during the next year-plus.

The expected population growth also will push up imports to Middle Eastern nations. The study led by Lampietti noted that by 2030, the Middle Eastern region's imports of cereals could increase 55 percent higher than amounts from 2000.

Unless they take preventative or preparatory steps, "Arab countries will become more and more vulnerable to global food-price shocks," the World Bank report stated.

Source: http://www.danielstrading.com/resources/news/General-Financial-News/Wheat-price-spike-spells-trouble-for-reliant-Middle-East-states_800512695/