The price of wheat has doubled in the past year.

Wheat prices rose to a new record Wednesday, passing $9 a bushel in Asian trading, on concerns that declining global output will further shrink inventories at a 26-year low.

On Tuesday Statistics Canada reported that in Canada,  the world's second-largest wheat exporter, total stocks of wheat, which include on-farm and commercial stocks, were estimated at 6.8 million tonnes, a decrease of 29.2% or 2.8 million tonnes from the same period in 2006. Lower wheat stock levels were the result of strong above-average export demand, brought on by a tight world supply-and-demand situation.

On-farm Prairie inventories of wheat were down 54.8% from July 2006 to 1.9 million tonnes. The five-year average is 2.3 million tonnes. Farmers reported decreases in all three Prairie Provinces. The largest decrease, 1.7 million tonnes, occurred in Saskatchewan, where stocks hit 880,000 tonnes.

Total stocks of durum wheat (the basic ingredient in the production of pasta) amounted to 1.2 million tonnes, down a sharp 62.2% from the record set in July 2006. The five-year average for July is 2.1 million tonnes. Export demand for durum wheat has increased considerably, the result of strong global requirements after several years of oversupply.

Durum producers in Saskatchewan and Alberta reported they held much less durum on their farms in 2007. On-farm stocks in Saskatchewan were down 83.0% to 230,000 tonnes, while Alberta farmers reported a similar decline of 75.9% to an estimated 70,000 tonnes. Commercial stocks also declined by 42.3% to 932,000 tonnes.

Feed grain stocks fall below the five-year average

Total stocks of barley on July 31 tumbled 54.6% to 1.5 million tonnes, a level well below the five-year average of 2.4 million tonnes. Generally higher world prices, brought on by demand for corn for the ethanol industry and a decline in Canadian barley production in 2006, were responsible for the drop.

Australia forecast production fall

The US is expected to cut its forecast for the wheat crop in Australia to 18 million tons, from 23 million metric tons in a keenly watched report to be published today by the US Department of Agriculture (USDA).

Wheat prices have more than doubled in the past year and the impact of rising prices are being felt in developing countries in particular where food accounts for 65 per cent of household budgets compared with about 10 per cent in wealthy countries.

Wheat for December delivery rose as much as 10.5 cents, or 1.2 percent, to $9.01 a bushel in after-hours electronic trading on the Chicago Board of Trade. The contract was at $8.97 a bushel at 11:45 a.m. in Sydney. Prices have risen 80 percent since January.

Farmers faced an unprecedented rural crisis within a month unless big spring rains arrive, Australian Agriculture Minister Peter McGauran has warned, according to the Melbourne Age newspaper today.

"Unless there are spring rains in the next three to four weeks of substantial volume then Australia will have an agricultural and rural crisis on its hands like never before," McGauran said yesterday.

The Australian Bureau of Meteorology will release later today its latest outlook, but he held little hope of a break.

Senior forecasters say there is only a 40 per cent chance of above-average spring rain in Victoria.

McGauran said: "There's been too many predictions from the bureau that have raised expectations or hopes in the past. If by some miracle their predictions are more accurate this time then that will be a bonus.

"Otherwise, everybody else is preparing for the worst. It's a rapidly deteriorating situation in many parts of Australia."

He said central-west NSW, the northern quarter of the West Australian wheat belt and the southern Murray-Darling Basin were most in need of rain.

The Bureau of Meteorology has said that late autumn and winter has been very dry over parts of southern Australia, particularly in Western Australia and South Australia. For some areas it is the second rainfall deficient winter in successive years, with winter rains being suppressed in 2006 by an El Niño event. At the yearly time-scale, rainfall deficiencies are evident in all states and territories, with the exception of the Northern Territory. As August 2007 was generally wetter than August 2006 in the areas with twelve-month rainfall deficiencies, there was a slight easing of these deficits compared with the situation at the end of July.

Bureau of Meteorology data revealed that Melbourne experienced its driest 365-day period on record to 9 am on the morning of Tuesday, 15 May, 2007.

Head of the Victorian Climate Services Centre, Dr Harvey Stern, noted: “Melbourne’s average yearly rainfall is 638.8 mm, but for the 365-day period ending today Melbourne had received less than half that amount, 316.4 mm.”

According to Dr David Jones, Head of the Bureau’s Climate Analysis Section, today’s record highlights the severity of the drought that continues in the southeast corner of Australia. “This record shows that unprecedented severe drought conditions persist in Melbourne and surrounding areas over the last year”, said Dr. Jones.

Rabobank Group has said the Australian wheat crop could be as low as 15 million tons.

As the US is the world's largest wheat exporter, today's report from the USDA will present a key outlook on the market.

In Tuesday, the OECD warned that subsidies for biofuel production were boosting food prices and damaging the environment.