First, here is a graph of wheat prices going back to 1866. Anytime you can show 150 years of data in a chart, it's pretty cool.
However, if we put wheat prices into "real" terms, the chart changes dramatically. Rather than a run-up in prices since ~1950, we actually see the "real" inflation adjusted value of a bushel of wheat declining from 1950 to a bottom in 2000.
I don't show this data to argue that wheat is historically cheap. You can't make a judgement call on cheap or expensive without analyzing the numerous other factors influencing price including substitute products, production costs, or yields. Rather, I just find it a fascinating truly long-term series of data.
A couple of quick observations:
- The World War I price spike stands out as the pinnacle of wheat prices, peaking at over $42/bu. (in 2015 dollars) in 1917. Interestingly, for many farmers in the northern great plains, the fallout from this (along with poor weather patterns / yields) in the 1918-1928 time frame made the "roaring 20s" a worse economic period than the Great Depression.
- While World War II drove a second major run-up in wheat prices, it was nowhere near the levels of WWI.
- The Great Grain Robbery of 1972 (when the USSR bought a large quantity of U.S. wheat at subsidized prices) also stands out. This and a good overall history of the largest grain merchants is well covered and worth reading about in the book Merchants of Grain.
Where do wheat prices go from here? I can honestly say I have no idea. One quote, however, has always stuck with me, and that is "wheat is a weed." Many of the old farmers say this to indicate that wheat is easily grown anywhere (prompting the joke "I can grow in on my land, so it must be a weed") and if a substitute commodity can be grown, it probably will be.
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