March 29, 2008

Bad Wheat Ideas

wheat fieldThe Retail Bakers of America (RBA) have urged congress to help with wheat prices.

A group of the nation's flour millers and bakers came to Washington, D.C., during the second week of March to seek some relief to the problem of high wheat prices and relatively short supply.

Their suggestions were to curb wheat exports until domestic needs were fulfilled and to allow land in the Conservation Reserve Program to be released without penalty.

Cutting back on exports would indeed lower wheat prices. Since half the wheat that is produced in this country is exported it would essentially cut demand in half. That would serve to lower wheat prices in the short term.

But faced with less demand and lower prices, farmers would simply switch to other crops that offered higher returns. So although prices may come down in the short term, in the long term it would lead to lower production and even higher prices.

This years winter wheat crop is larger than last years by over 1.6 million acres. Farmers are already responding to increased wheat prices by increasing production.

This years spring wheat crop has not been planted yet. The RBA better hope that the mere threat of limiting exports isn't enough to scare prospective wheat farmers into switching to other crops

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