In the world of wheat, there is a silent killer out there - and the markets don't seem to care.

Stem rust has been around for ages. The Romans had a god named Robigus who was worshipped in order to protect the crop from stem rust. In 1954, 40% of the wheat crop in the U.S. and Canada was lost to wheat stem rust.

Wheat rust is in the news again.

In Uganda in 1999, a new and more virulent strain of wheat fungus was detected: Puccinia graminis, or Ug99. It can take a healthy field and transform it into a mass of black, tangled, shriveled grain in just a few weeks; crop losses range between 50-70%.

Unfortunately, Ug99 is on the move; as the Wall Street Journal article points out, it's moving quickly out of Africa and towards major wheat-producing countries like India and Pakistan.

The spores of the fungus are carried by the wind, spreading the disease to susceptible strains of wheat. The UN's Food and Agriculture Organization estimates that those susceptible varieties of wheat make up 80% of the wheat planted in Africa and Asia. This is not the first rust threat to come out of Africa, and scientists have been able to predict the spread of the disease from data of earlier infestations. So far, their predictions have been right on the money. It has been found in East Africa and Yemen, and recently it was positively identified in Iran. The real kicker is that the strain of Ug99 found in Yemen had already mutated into a more virulent form than that which caused reduced wheat yields in Uganda, Ethiopia and Kenya.

Now, these countries aren't major wheat producers, so global wheat supply has not been affected yet. But the local effects can be severe. In these countries, it is the poorer farmers who are most heavily affected because they cannot afford the expensive fungicides that can stop the disease, and the local supply-and-demand balance is tricky.

But looking at the map of a previous rust migration, you can see which way the winds blow.

Source: Sounding the Alarm on Global Stem Rust, May 2005

Here's another prediction, from the Borlaug Global Rust Initiative.

Iran is uncomfortably close to the major wheat-producing countries of Pakistan, India and China. And Iran (like much of the region) is also suffering from declines in yields due to drought. In a vacuum, it wouldn't seem like this narrow belt could impact world wheat that much, but when you consider that the Middle East is the second-largest importer of wheat after North Africa, any drop in production hurts them a lot. And with South and East Asia (read, India/China/Japan) collectively consuming a third of the world's wheat every year, this is a complex, unstable and unhealthy condition. The implication of the big scary maps is that more and more wheat will need to be grown above the frost line to feed the countries below it. That means more exports from the U.S. and Russia, and increased prices long term.

It's not all doom and gloom. The scientists are hard at work. Cornell University, with a grant from the Bill and Melinda Gates Foundation (practically a government aid program in its own right, if you follow these things), is working on partnerships with various countries' agricultural research centers, focusing on developing resistant varieties of wheat and getting them to farmers in poor areas to protect their crops. But funding was recently cut for the USDA's Cereal Disease Laboratory, and even though the lab's name conjures visions of Cocoa Puffs gone amok, it is an important part of combating food security issues.

What have the markets been doing since the most recent news of Ug99's spread? Nothing.

In fact, wheat prices have come down 60% since closing at 12.82 on March 12, due to tight supply. With increased plantings of wheat this year, and harvesting beginning, prices are expected to continue to go down. The USDA is forecasting that world wheat production may climb to a record 656 million tons - an 8% hike.

It's clear that we here in the U.S. don't need to worry that rust is going to destroy our wheat fields in the next year or so - unlike India and Pakistan. But given the way this strain spreads, it is not unimaginable that Ug99 will reach Russia, China, the U.S. and Canada eventually. Hopefully, by the time that happens, resistant varieties of wheat will be well-developed and in use around the world. Otherwise, wheat at $12.82 is going to be a fond memory for bread makers.

Links:

Borlaug Global Rust Initiative

Sounding the Alarm on Global Stem Rust, May 2005