Rising wheat prices are welcome news for growers, but also present some reasons for caution, warn University of Idaho agricultural economists.
Wheat future prices leaped by nearly 50% during the summer, trading for more than $9 a bushel for the first time.
While prices since have declined, they remain a record highs. The soaring prices reflect Australia's poor crop last year, and lower Canadian and European Union production this year.
Declining world wheat stocks and rising demand convinced buyers to lock in supplies for their needs, paying the high prices to ensure they would have enough wheat in coming months, says Larry Makus, UI professor of agricultural economics.
"Supplies are tighter than we've ever seen them and buyers are reacting to that," he says. "I consider it rational business-like thinking. The reasoning is if you bay $6.50 or $8.50 for wheat it doesn't have much impact on the price of Twinkies."
The price paid for wheat by bakers and noodle makers around the world is typically a small portion of their product price once they're on the grocery shelf, he explains.
Wheat prices are beginning to concern food processors and consumers because of the rapid increases and the sense that the global marketplace is entering the unknown.
"What makes this interesting to me scientifically is that we've never seen a market like this before," notes Makus.
Paul Patterson, UI Extension agricultural economist, says he recently talked with a grain analyst trying to figure out how high prices might go and how growers would respond in terms of adding wheat acreage to planting schedules.
For more information, Patterson has wheat price graphs posted for Portland, Ore., and Pocatello, Idaho, at www.ag.uidaho.edu/aers/rcharts.htm.