To the uninitiated, sukhovei sounds like it might be the latest production at the Bolshoi or perhaps a Soviet jet fighter. Traders in Chicago’s grain pits, who have just seen the largest monthly wheat prices surge in nearly 40 years, are learning to pronounce it with dread. The phenomenon – a hot, dry wind akin to an American Dust Bowl storm that blows from central Asia and can devastate the breadbaskets of Russia and Ukraine – could further reduce an already heat-wilted crop. US futures prices topped $7 a bushel on Monday, a two-year high that comes just weeks after a nine-month low, and European prices surged past €200 a tonne.

The Soviet Union featured prominently the last time wheat prices surged so quickly, back in 1972-73. As chronicled in The Great Grain Robbery, the Soviets secretly bought up nearly a third of America’s wheat crop after a disastrous harvest, helping kick off an inflationary period that would soon be greatly worsened by the Arab oil embargo. Since communism’s collapse, the former Soviet Union has transformed itself from agricultural basket case back to breadbasket, producing 15 per cent of the world’s wheat. This understates its importance as it is a far bigger exporter than some larger producers.

Wheat Supplies and Food Fears

	August 9, 2010

As the Russian landscape burns and Eurasia's agricultural zone sizzles in a record heat wave, the agricultural commodities markets are threatening to spawn a food crisis akin to the one in 2008. Mixed signals regarding the size of the global wheat supply and the likely impact of Russian Premier Vladimir Putin's August 4 decision to halt all exports of the grain from Russia for the rest of 2010 are leading to concerns that price inflation in the wheat market could usher another food crisis. The shortage in 2008 left hundreds of millions of people worldwide unable to afford basic foodstuffs, aggravating the overall impact of the later global financial crisis upon poor countries.

A key lesson of 2008 is that volatile global financial markets can result in food commodity price speculation that has dire consequences for the world's poorest. The inflationary trend that slammed poor countries in early 2008 began with a slow but steady rise in commodity trading prices in early 2007. By the summer of 2007, the overall volume of trading on the U.S. food commodities markets had skyrocketed to record levels, signaling that large investors recognized weaknesses in the stock and real estate markets and were seeking safer havens. The result was a phenomenal escalation, not only in the volume of food commodity investment, but also in trading prices.