Source: WSJ

Harsh heat and a lack of rain in Russia have killed half of the crop in some hard-hit areas. The slump in production in one of the world’s most fertile breadbaskets has pushed prices up 62% since early June, and last month saw the biggest and fastest increase since 1959.

Wheat prices, which briefly rose above $7 a bushel on Monday, are at their highest level since September 2008, the year when low supplies of the grain fueled a global food crisis that led to riots in several countries.

“That’s a massive increase in a very short time frame,” said Terry Roggensack, an agriculture specialist at the Hightower Report, a Chicago-based commodities firm. “It is a scramble period.”

While prices are still well below the levels of 2008 and global stockpiles are much stronger than they were two years ago, the specter of the 2008 shortage looms large, particularly for countries that can’t depend on their own production.

This weekend, Egypt, the world’s largest wheat importer, bought 180,000 metric tons of wheat, its second purchase in the past two weeks and more than it had initially planned. China is warning local businesses against grain hoarding. In India, officials have allowed once-plentiful stockpiles to rot in fields, leaving many people hungry and driving up local prices.

All are seeking to avoid a repeat of 2008, when Egypt, Haiti and Pakistan were among countries hit by riots over rising food costs. At one point, the World Bank said higher commodity costs had pushed up food prices 83% in three years. Commodity prices plunged amid the darkest days of the financial crisis later that year and in 2009. But even then, some analysts predicted a food crisis would return when the economy recovered.

Russia’s troubles are having an even bigger impact in part because many of the world’s wheat exporters have experienced some crop problems. Big exporters like Canada have struggled with excessive rains, while Australia has battled locusts. Patches of wheat-growing regions in the European Union also have been struck by drought.

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