Oil hits record highs $100 plus - Wheat prices hitting UK retail food prices. Northern Wreck will be the ruin that wrecks Gordy's day

Oil price hits record high in US Press Association

The cost of light, sweet crude reached a record 100.40 in New York .....speculation that OPEC will cut output ... Tuesday saw a 4.5% surge in trading on the New York Mercantile Exchange (Nymex), following a 3% rise last week.

Wheat prices start to get a public airing in UK

Anna Hill On BBC Farming Today this morning spoke to a wheat farmer (6 mins into programme) who explained production costs rise, fuel - diesel was 35p a litre to 50 p litre , Fertilisers are £300 a tonne compared with £150 last year .Today it is costing £100 to produce a tonne of wheat.

She points out that world stocks are down from 20 weeks to 9 weeks.

Hugh Wiseman CamGrain farmers co-op (they have deal with Sainsbury's) talks of a crisis in world food supplies. World is short of wheat for humna consumption. Increases in wheat and grain yields seem to have reached a plateua . "We are down to the bare boards". Also referred how CAP reduction to zero for set aside would have to be continued despite concerns of the RSPB. See EU set aside zero subsidy policy produces a rapid response by English farmers.

Richard Clarke News Editor of the Grocer explained how their weekly "100" survey showed food prices across 100 typical food items had risen 8%. This included white bread up 33 % semi skimmed milk 21% and free range eggs 38%. He ascribed this to wheat costs, improved diets in the Far East, biofuels and road fuels, and plastics.

If interested in history See December 23, 2007 Wheat , corn, soya prices at record levels - demand exceeds world supply, fertiliser, farm and fuel costs rise - food costs jump and inflation follows and also September 16, 2007 Australian drought - poor spring rains - higher world wheat prices in prospect - low stocks and heavy demand and even earlier , November 01, 2006 World wheat shortages loom - prices soar - when it was suggested .."Get out the dough bowl and buy some yeast."

Now for the slightly better news. On MGEX Spring Wheat has fallen back from highs last week at US$18.15 a bushel down from US$18.60 and the spot month limit has fallen back to 60 cents and will be removed from Feb 25th.

Compare this with the graph Sunday Feb 18th when we asked ,had wheat reached its top ?

Should you bump into Lord King of the Bank of England & Northern Wreck or any of his double first Economists please pass on the news.

PS : Looks like the House of Lords are going to spend some time looking at the small print of the Granite Contract. See Tuesday, September 25, 2007 (the day the Directors cancelled the Interim divvy ) Northern Rock plc - Down’s Syndrome North East Association (UK) - Granite "securitisation" and the duties of the Directors of Northern Wreck- a puzzle and also Richard Murphy's useful exegisis of Granite.

Australian drought - poor spring rains - higher world wheat prices in prospect - low stocks and heavy demand

The national outlook for Australia for total spring (September to November) rainfall, shows no strong swings in the odds towards wetter or drier conditions over most of Australia. However, the odds favour a wetter than average spring in southwest WA, while a drier than average spring is the more likely outcome in some relatively small patches in eastern Australia.

The pattern of seasonal rainfall odds across Australia is a result of continuing higher than average temperatures over parts of the south tropical Pacific Ocean, and also in parts of the tropical Indian Ocean.

Any shower activity in Australia during the next seven days will be light andmostly confined to Victoria and southern portions of West Australia, accordingto the DTN Meteorlogix forecast (subs). They also said that further losses to production can be expected under the current deficient rainfall pattern.

Argentina has had better luck with moisture in its wheat fields recently.Light to moderate rain, with some locally heavier totals over southern BuenosAires, were observed during the past 24 hours.

Australian Wheat yield forecasts.

Agricultural production models (through DPI&F/APSRU) still suggest remarkably varying potential yield values for this year, largely due to very low soil moisture levels and relatively poor rainfall in regions such as inland NSW, South Australia and southern inland Queensland.

In his weekly Radio Broadcast on Saturday Premier Howard said the Federal Government has pledged to provide further financial support to drought-stricken farmers, if necessary.

With the drought showing no sign of breaking, Prime Minister John Howard promised that the government would stand “shoulder to shoulder” with rural and regional Australia.

“If more is needed to ensure our regional communities and farms survive
this prolonged drought it will be provided,” he said in his weekly radio message.

“The drought is continuing to have a devastating impact on much of rural and regional Australia."

The impact will be felt further afield as wheat prices show no sign of declining and demand is increasing as living standards grow in China and India.

In Chicago, wheat for December delivery surged to an all-time high of US$8.38 a bushel and Canada said crop yields would be down by 20% and may produce its smallest wheat crop in five years because of reduced plantings and drought damage. Wheat prices have jumped 110 per cent in the past 12 months and have risen threefold since 2000.

The U.S. Department of Agriculture has forecast a fall in global inventories to their lowest level in 26 years.

There was a 1 day Pasta Strike in Rome and other Italian cities on Thursday 13th September as people protested over increases in pasta flour prices. Italy produces only about half of the high-protein durum wheat used to make high-quality pasta and bread; the rest is imported from overseas markets including the United States, Canada and Ukraine.

In France the price of a standard crusty baguette has risen 8% this year and now costs just less than US$1 and three times that in the US if you can find a supplier.

The Ukraine is likely to extend the current grain export quotasuntil Jan. 1, 2008, and not Oct. 1 as was previously planned, the press serviceof the agriculture ministry reported.