How Much Longer Can This Go On?

Imagine being able to get USD9/bushel for wheat, double the going rate - the equivalent of around GBP165/tonne. Guaranteed, no strings for as much wheat as you want to sell. And if by some magic, wheat prices move above that then you can simply sell your wheat elsewhere and bank the extra profit. Nirvana, eh?

Well not quite Nirvana, Parana actually, the largest wheat producing state in Brazil. The government there have set the minimum price at which they are prepared to pay for the best grades of wheat at around USD9-9.25/bushel, and not surprisingly there are plenty of takers.

So many takers in fact that there isn't enough storage to handle all this wheat, especially not since the government silos are already choc-full of corn, which they are also buying at a substantial premium to cash prices.

Of course all this is putting a massive hole into government coffers, so much so that moves are now afoot to lower the minimum levels back into line with cash prices. Farm groups of course are saying that farmers need these prices if they are going to stay in business.

Regardless of what the farmers want, it is clearly unlikely that support levels set at a time of booming commodity prices can be held where they presently are indefinitely. That could have a negative impact on plantings, and certainly inputs for 2011.