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HONG KONG — The United Nations’ food agency issued an alert on Tuesday warning that a severe drought was threatening the wheat crop in China, the world’s largest wheat producer, and resulting in shortages of drinking water for people and livestock.
China has been essentially self-sufficient in grain for decades, for national security reasons. Any move by China to import large quantities of food in response to the drought could drive international prices even higher than the record levels recently reached.
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Droughts in Eastern Europe (specifically the Russian/Ukrainian grain belt) have diminished wheat supply, which is a major cause in the rise of the price of Wheat. A drought in China is sure to cause wheat prices to increase, however the extent is still unknown due to the lack of data on Chinese wheat inventories. Wheat futures are expected to rise until the end of 2011, according to current data and futures contracts traded at the Chicago Mercantile Exchange.
Could another food crisis be in the making?