Wheat market volatility concerns bakers

Farm and Ranch August 9, 2010 The recent skyrocketing of wheat prices due to the Russian drought and grain export ban has U.S. bakers worried. The American Bakers Association blames what it calls the dramatic increase in market volatility on index funds. Hayden Wands, chairman of ABA’s Commodity and Ag Policy Committee presented the bakers’ concerns to the Commodity Futures Trading Commission at a meeting last week.

Wands: “In the last 30-days we have seen a 60% increase in our flour prices due to the volatility and over the last 24 hours we have seen a 15% increase in our flour prices due to the volatility in the marketplace. So it has caused us to drastically re-examine how we hedge our position.”

The ABA wants the CFTC to impose position limits on index funds treating them as traditional speculators rather than hedgers.

Wands: “But I think what we should initially address is who are the new players that have come into the marketplace and that has been the index funds. The size of their presence, they own 367% of this year‘s soft wheat crop alone. So there size is what we think has caused the volatility in the marketplace. We are not talking about high prices. We are talking about price moves.”

Those price moves, according to Wands, have already forced some small bakers out of business.

I’m Bob Hoff and that’s the Northwest Farm and Ranch Report on Northwest Aginfo Net.