In 2011, the price had already started to go down because of the large supply on the market.
Now, however, the lower harvest keeps the wheat price up and competitors on the market say tension will not go away given the high demand.
“Prices are on the rise because the market needs have not been met as a result of the low production. The market is not frozen because farmers have sold about everything they had to sell lately because they needed the money to pay their debts to suppliers,” explained Laurentiu Baciu, chairman of Romania’s Agricultural Producers Associations League (LAPAR), one of the largest farmer organizations on the local market.
The increase in wheat price should also show in inflation considering milling and bakery products account for 7.5% of the consumer basket. The annual inflation rate reached 3.8% in August, the year’s highest.
The fast-paced rise in wheat prices has restored a balance in the accounts of the farmers who got a lower harvest this year, merely 4.7 million tons, one third less than in 2011. A simple calculation shows that the farmers who bet on wheat this year made a profit, considering a one-third decline in production drove up prices 60%.
One of the reasons for the rise in wheat prices is that some farmers did not rush to sell right after the harvest and stored it in silos waiting for higher prices in the fall.
Romanian farmers and traders have built silos and barns with a capacity of about 2.5 million tons of grain in 2009-2012. These new silos can store about EUR500 million worth of wheat, according to ZF calculations based on the current prices.
“About 20% to 30% of the contracts signed this spring are no longer kept by farmers because of skyrocketing prices. Both major traders and brokers are incurring losses,” said a broker who buys grain from farmers in the south of the country and sells it to the processors or major international traders.
Even though some of the contracts were not fulfilled because of farmers waiting for higher prices, the major traders have not had to make significant changes to their plans yet.
Exports of grain (wheat, corn, barley i.e.) from the Constanta port, through which most of the grain traffic passes reached 3.6 million tons after the first seven months, double as much as in the year-ago period, according to the data of the national company in charge of Romania’s maritime harbors based in Constanta.
(English version by Loredana Fratila-Cristescu)