The International Grains Council and Rabobank have indicated that the world’s production of wheat is likely to increase by about 40 tonnes on last year’s figure.

With wheat prices reaching record highs in February the prospect of a better season is welcome news, especially as global stocks remain at historically low levels. The price of wheat did reach $13 a bushel in February but is now back to $8 a bushel, which is equivalent to its’ price in November last year.

Due to the low stocks prices are likely to remain at similar levels in the near term, but if predictions on production are correct the price could begin falling at the end of the year. Europe, China, Argentina, India and Australia are likely to be the primary contributors to the bumper crop.

Wheat prices have been a key cause of the drastic rise in food prices inflation this year with corn and rice also rising considerably. Rice is now at record highs and corn has been trading at historically high levels. The fear over food prices has spread around the world with the UN meeting overnight to discuss potential solutions to the problem. The UN are set to release their findings later this week.

US Secretary of State Condoleeza Rice, meanwhile, has admitted at a Peace Corps country directors meeting that biofuel production has played a part in the rising food prices. “There has been apparently some effect, unintended consequence from the alternative fuels effort,” she said. “We think that it is not a large part of the problem, but it in fact may be a part of the problem, the ethanol debate.”

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