Background

Beijing is the capital city of China with a population of more than 19.72 million. There are over 5 million private vehicles in Beijing and traffic congestion is very common in rush hours. Although the bus system (there are 62026 buses in Beijing) and subway system (16 subway lines) in Beijing are very busy, people still complain about the traffic jam. There are three major policies to reduce traffic congestion and I believe some of them are very useful. The three major policies are: cheap public transport system, odd-even license plate system and license quota system. These policies were introduced by Mayor Wang Qishan who is from the Communist Party of China, the ruling party in China. Because of the Beijing Olympic games in 2008, Beijing government decided to reduce traffic congestion and reward Beijing citizens.

The goals of these policies are the same: Reducing traffic volume in certain areas (from 1^st Ring Road to 5^th Ring Road), reducing carbon emission and encouraging residents to use public transport system.

Implementation

Cheap Public Transport System:

From Oct 7^th, 2007, it was announced that bus ticket price is ¥0.4 for adults and ¥0.2 for students. The subway ticket price is ¥2 for all zones. In order to show how cheap the price is, I’d like to show some numbers. In 2011, real GDP per capita in Beijing is ¥80394. A Big Mac is ¥15 and a bottle of 2 litres coke is ¥6.5. In Vancouver, the price of a Big Mac is about $5 and a bottle of coke is about $2.5. That means, a bus ticket price for adults is just like $0.1 in Vancouver and a bus ticket for students is even less than $0.05. The ticket price of all zones subway is $0.67. We can see how cheap the ticket price is.

Odd-even License Plate System:

From August 17^th, 2007, Beijing government announced that odd-even license plate system was implemented. You can drive freely on weekends and holidays but can’t drive your car within the 5^th ring road, if:

On Monday, if tail number of license plate is 0 and 5;

On Tuesday, if tail number of license plate is 1 and 6;

On Wednesday, if tail number of license plate is 2 and 7;

On Thursday, if tail number of license plate is 3 and 8;

On Friday, if tail number of license plate is 4 and 9. [1]

License Quota System:

From Jan 1^st, 2011, the license quota system was implemented and everyone who wants to buy a car in Beijing must register by the first eight days of every month and only 17,600 applicants can get the quota every month. The government uses computer to randomly choose the “lucky” applicants and there are 563,645 applicants every month. So, only 3% applicants can get the quota. If you get the quota but don’t buy a car within 6 months, the quota will expire.

Coverage

For odd-even license plate system, there are some vehicles that do not need to be covered in the policy. Police cars, ambulance, school bus, engineering rescue vehicles, gardening vehicles, taxis, buses, fire trucks, and law enforcement vehicles are not covered in the policy. For license quota system, only applicants who live in Beijing without cars can apply for the quota. 88% of the total quota was given to private buyers, 2% of the quota was given to bus system and 10% of the quota was given to private and public companies.

Distributional Impacts

Cheap public transport system is good for poor and middle class people. With the cheapest ticket price in China, people in Beijing like to travel by public transport if it is unnecessary to drive private cars. Rich people, however, don’t care about the low price of public transport because they like the convenience of driving cars. Odd-even license plate system is fair to everyone, no matter you are rich or not, if today your car is limited to drive, you are not allowed to drive. However, some people want to buy second cars so they can drive every day. Of course this is not a common issue, however, if rich people buy second cars, there will be more cars in Beijing and the traffic congestion will increase. So, the policy of license quota system was introduced to solve the problem. With the quota, every applicant has the same opportunity to buy a car. Since the quota is randomly distributed and only people without cars can get the quota, rich people can’t get the “privilege” of owning two cars.

Cost-Effectiveness

In order to keep Cheap Public Transport System, the net cost of Beijing government is ¥13.8 billion [2].(about 2.23 billion CAD) every year. Compare with other cities, the low price policy benefits at least 80% citizens in Beijing and it is a good way to reduce traffic congestion because people can use the convenient public transport system almost freely. However, some people argued that it can be more cost-efficient if the money paid to the public transport system can be used to benefit specific groups. For example, the money can be used to support poor students and patients. However, as a policy to benefit everyone and reduce traffic volume, Cheap Public Transport System policy is successful. Beijing government did a survey to see if it is possible to increase the ticket price a little and most people said they will still use public transport system even the price is higher. Odd-even license plate system is a direct way to reduce traffic congestion. Although it can make some people feel inconvenient in one day of a week, it is still a good policy. People can use public transport and there will be about 1 million cars have to “rest”. It is very helpful to reduce the traffic jam when 1 million drivers are not allowed to drive every day. License quota system is also a direct way to reduce traffic jams. In 2011, about 617,000 applicants can’t buy cars because they don’t have the quota. [3] This is very impressive and it is believed this policy can cause a loss of ¥100 billion (about $16.13 billion) to local dealers, automakers and government revenue. However, Beijing government insists the policy because it is a good way to reduce vehicle increasing. It is the price of reducing traffic congestion.

Conclusion

There are three major policies in Beijing to reduce traffic jam: cheap public transport system, odd-even license plate system and license quota system. Cheap public transport system can benefit everyone in Beijing and it is like a tax return to everyone. Odd-even license plate system is a good way to reduce 20% cars on the road with zero cost. The cost effectiveness is very good. License quota system is very expensive because the quota will reduce vehicle consumptions.

Reference

[1]. The official website of Beijing Traffic Management Office: http://www.bjjtgl.gov.cn/zhuanti/10weihao/index.html

[2]. In 2012, the government subsidy for Beijing public transport system is ¥13.82 billion: http://auto.163.com/13/0126/19/8M5SUKBQ00084IK8.html

[3]. The official website of vehicle quota management Office: http://www.bjhjyd.gov.cn/

Background:

The BC Mineral Land Tax Act is tax levied on owners of freehold mineral rights. Before 1950, the Crown sometimes granted freehold ownership of minerals with the ownership of the surface land, or by grants of ownership of the minerals only. Such areas comprise a small portion of the province. For the rest of the province, the government rents or leases rights to minerals under tenure legislation such as the Mineral Tenure Act, the Coal Act or the Petroleum and Natural Gas Act. The tax was proposed by the Left because they believed the resource in BC belongs to all British Columbians. Mining comanies have to pay taxes to return the province. High mineral tax was strongly opposed by both mining companies and the Right. They claimed that high resource tax will reduce competitiveness and this will decrease employment rate. The Mineral Land Tax is assessed annually at $1.25 to $4.94 per hectare, depending on the amount of land to which the owner has freehold mineral rights and whether minerals are being produced from the land.

Goal:

The Mineral Land Tax Act is tax levied on the small number of land owners in the province granted mineral rights under land before 1950. The purpose of Mineral Land Tax is to provide a return to the province from commercial use and depletion of the province’s coal and mineral resources.

Coverage:

Mineral Land Tax rates are based on the size of the mineral land and whether or not the land is in production. There are only two types of exemptions:

1. Charitable Exemptions:

Registered charitable organizations are exempt from the payment of Mineral Land Tax. Please contact us with your charitable registration number to claim this exemption.

2. Agricultural Exemptions

The Mineral Land Tax Act provides for a classification of “agricultural mineral land”, where the land is used primarily for agricultural purposes. Land classified as agricultural mineral land must be assessed under the Act, but no tax is payable. Please see the Application for the Classification of Agricultural Mineral Land for more information.

Tax Rate and Tax Revenue:

As we can see from the table above, Mineral Land Tax rates are based on the size of the mineral land and whether or not the land is in production. Not later than July 2 in every year, owners of mineral lands must pay the tax. If Mineral Land Tax remains unpaid for two consecutive years, the mineral rights become subject to forfeiture, which means they can be taken away by the government. A person can choose to surrender all or part of an interest in mineral land to the government at any time.

Refunds are available in order to reward mining exploration. Normally, 20% of exploration expenses fund by the government and the revenue raised from Mineral Land Tax is strictly used for environmental expenditures. The corporation or partnership must incur qualified mining exploration expenses before January 1, 2017 for determining the existence, location, extent or quality of a mineral resource in B.C.

Cost-Effectiveness and Distributional Impacts:

About the cost-effectiveness of the policy, I believe this policy is necessary. First of all, as the Mineral Land Tax is implemented, both the consumers and producers are hurt and deadweight loss was formed. However, as the government rewards mining exploration by refunding 20% of the exploration expenses, the deadweight loss decreases. Second, except for Mineral Land Tax, there is also a Mineral Tax. Mineral Tax is levied on operators of mines (including placer mines) and quarries. As we can see, both taxes are imposed on mining companies and they are somehow overlapping. The goal of Mineral Land Tax is not increasing revenue, but saving resource, protecting environment and reducing pollution. The Mineral Land Tax alone is not high, but together with Mineral Tax, mining companies have to be careful when exploiting resource since they have to pay for both the land and their production. It is obvious that these two policies can save resource and reduce waste. I believe the total policy cost is acceptable because saving resource and reducing waste are more important. With the policy, a new optimal exploiting level is formed and the market will move to the optimal level by itself.

Is Mineral Land Tax an important tax for mining companies in BC? I’m afraid it is not. For example, in 2011, the total Mineral Land Tax in BC is only $601,000 while Mineral Tax is $363,911,000. In 2012, the total Mineral Land Tax in BC is $594,000 while Mineral Tax is $357,706,000. Mineral Land Tax is only considered as land rental cost. It is not a major expense. So, unlike Mineral Tax, it won’t affect mining companies decisions. However, I think it will be a good idea to eliminate Mineral Land Tax to reduce administritive costs and reduce burden to the mineral extraction companies. I believe a tax on mineral company is necessary and these two taxes can merge into a new mineral tax.

As the government rewards mining exploration by refunding 20% of the exploration expenses, how will the policy affect people? Well, it is obvious that producers can reduce some of the cost and consumers can also pay less. However, they still need to pay more because of the tax. After the tax, the price will go up and demand will decrease. Both producers and consumers will pay for the tax. The amount of paying based on the slope of supply and demand curve. However, as the government refund the tax, both individuals and business can get some benefit.

How can mineral tax affect the market? I can give an example. In 2011, Australia announced that a 30% Mineral Tax was imposed for mining companies with annual profit of $75 million. This is a compromise because the government had planned to impose a 40% Mineral Tax. More Mineral Tax is a new international trend. However, it will hurt both the producers and consumers. Chinese buyers decided to buy more ore from Africa instead of Australia. Of course, the ore price in Africa will also increase because of the increasing demand. Australian mining companies claim that the tax imposed by the government makes them earn less and the policy will destroy Australian mining industry.

Conclusion:

So, in total, the mineral tax policy in BC can hurt business and consumers at the same time, but it is friendly to environment. I do think a refundable mineral tax is necessary since it can save resource and reduce the deadweight loss at the same time. However, since Mineral Land Tax is not important enough to affect decisions of mining campanies, my suggestion is that we can cancel Mineral Land Tax and impose a little bit more on Mineral Tax. It is more cost-effective and time-saving effort.

Reference:

1. http://www.sbr.gov.bc.ca/business/Natural_Resources/Mineral_Land_Tax/mineral_land_tax.htm
2. http://www.sbr.gov.bc.ca/business/Natural_Resources/Mineral_Tax/mineral_tax.htm
3. http://www.sbr.gov.bc.ca/business/Natural_Resources/Mineral_Tax/minrev_collected.pdf
4. http://www.bbc.co.uk/news/business-17441170
5. http://www.sbr.gov.bc.ca/business/Natural_Resources/Mineral_Land_Tax/MLT_Act.pdf

At first, I want to write something about the carbon emission policy in China, since the air pollution in Beijing was very serious recently. However, I was disappointed to find out that there is no complete carbon emission policy in China. The reason is pretty simple: Chinese government believes carbon taxes or permit will raise the production cost and slow down the economic development. As Chinese government put economic development at the first place, carbon tax or permit is off the table. Well, my question is, does carbon tax always have a negative impact on economics?

British Columbia is considered as the one of the first provinces or states in North America to implement a carbon tax. I visited the official website of BC Ministry of Finance and I was glad to find the carbon tax policy in BC is pretty attractive.

Policy Origin, Goals and Advantages

In November 2007, the Intergovernmental Panel on Climate Change issued a report showing that the Earth’s climate is changing because of human activities. It will become worse if no action is taken. So, on July 1, 2008, the BC carbon tax policy was implemented. The goal is to reduce greenhouse gas emissions (GHG) in BC. It’s estimated that B.C.’s carbon tax could reduce emissions in 2020 by up to three million tonnes of CO₂ emissions annually, which is equal to taking almost 800,000 cars off the road each year. The tax on carbon emission is a critical component of B.C.’s Climate Action Plan to reduce greenhouse gas emissions by 33 per cent by 2020.

The government claimed that beside the advantage of reducing GHG, there are five advantages of the policy: (BC Ministry of Finance)

1. This is a revenue-neutral carbon tax. That means, the BC government promises that every dollar collected from the carbon tax will return to taxpayers through tax reductions.
2. The tax rate started low and increases gradually.
3. Low-income individuals and families are protected.
4. The tax has the broadest possible base.
5. The tax will be integrated with other measures.

How the Policy Works

When the policy was first implemented, the tax rate stared low. It increased 5 dollars every year (from $10 per tonne of CO2 equivalent emissions in 2008 to $30 in 2012, no plan to increase anymore). I think this is really thoughtful since the factories need time to adjust themselves to emit less. The best part is that it is a revenue neutral carbon tax. Every dollar raised by the tax will be returned to both individuals and business through tax reductions. For example, in order to protect low-income individuals, a refundable Low Income Climate Action Tax Credit is designed to help offset the carbon tax paid by low-income individuals and families. I’ll discuss more about the revenue neutral carbon tax later. Since different fuels generate different amounts of GHG when burned, $30 per tonne of CO2 equivalent must be translated into tax rates for each specific type of fuel. The following table shows the per unit rates for selected fuels at July 1, 2012.

The Coverage of the Policy

The carbon tax applies to virtually all emissions from burning fuels, which accounts for an estimated 70 per cent of total emissions in British Columbia. Of the approximately 30 per cent of emissions that are not from fuels are not included in carbon tax:

1. 10 per cent are from non-energy agricultural uses (e.g. emissions from enteric fermentation, manure management, and agricultural soils) and waste (landfills);
2. 10 per cent are from fugitive emissions which cannot currently be accurately measured;
3. 6 per cent are non-combustion industrial process emissions; and
4. 5 per cent are from net deforestation.

The Province will look at options to extend the carbon tax to emissions beyond those generated by the purchase and use of fuels, and integrate the carbon tax with other climate action initiates such as cap-and-trade.

About the cost-effectiveness of the policy, I believe it’s pretty good. First of all, as the carbon tax was implemented, both the consumers and producers were hurt and deadweight lost was formed. However, as the government returned the money collected to the tax payer, the deadweight lost decreased. I was surprised to find out that the government even paid more than it collected. The average consumption of fuel per person in British Columbia decreased 4.5%. It’s a pretty successful policy. So, the carbon emission control policy is good and deadweight cost has been decreased as much as it can. I think it is a pretty good policy.

Distributional Effectiveness of the Policy

As the government returns the carbon tax to British Columbians, how will the policy affect people? As we can see from the table below, in 2010, the government collected 741 million dollars from individuals and business and returned 865 million dollars to people through tax reduction! The BC government is investing money to the policy.

Now, let’s look at how the policy will affect individuals and business. As we can see from the table below, before the carbon tax, the production quantity is Q₀ and price is P₀. After the carbon tax(t dollars), the price increases to P₁ and the quantity decreases to Q₁. Now, consumers need to pay P₁, so they are losing money. The producer, however, can receive P₁, but after the tax, they can only get P₁-t, less than P₀. So, both of producer and consumer are losing money after the carbon tax.

However, as the government return the tax (even more than tax revenue), both individuals and business can get some benefit. So, is it true that British Columbians don’t lose benefit? Well, for individuals, the tax return is mostly beneficial to low-income individuals and North and Rural Homeowners. The policy is less friendly to middle class British Columbians although there is a reduction of 5% in the first two personal income tax rate policy. For business, although the carbon tax can return the carbon tax as tax return to the companies, the government can’t return the loss of the sales. That means, the policy is still hurting the business.

Conclusion

So, in total, the carbon tax policy in BC can hurt business and middle class consumers but it is friendly to environment, low-income individuals and North and Rural Homeowners. I do think it is a successful policy since it tries it best to reduce the deadweight loss and improve the environment at the same time.

Last time, I wrote an article about the air pollution in Beijing. This time, I’d like to analyze the basic reason of pollution in China. As we know, China is a developing country with serious pollution. I believe the reason is lack of policy control. Why doesn’t Chinese government come up with effective policy to control pollution? Why pollution is serious in China? Well, I think there are 4 major reasons.

First of all, the highly developing economics makes environment worse. With the increasing need of resource, Chinese factories don’t care about the environment. Without regulation, they only care about profit. They don’t want to pay for abatement cost and they don’t have incentive to develop their equipments to make them more environmental friendly.

Second, the government’s attitude is one of the most important reasons. It is not difficult to understand that companies want to reduce cost without regulation. Government should be the “bad” guy to forces them spend more money. However, in order to keep economic growth, the government tries to ignore the serious environmental problem. They hardly pay attention to environment because they believe paying attention to pollution will increase cost and slow down the economic growth.

Third, with more than 1.3 billion people, the pressure on resource is too high. Because there are so many people, overexploiting resource is the choice we have to face. It is obvious that the result is serious since everyone has to breathe the highly polluted air.

Fourth, the public didn’t realize the increasing serious problem. Before the air pollution in Beijing becoming a globe hot news, the public and media fail to pressure government to facing the pollution. Base on a survey, most people don’t know how bad the problem is and how to fix it. Now, more people and media are arguing with the government and they are forced to draft legislation as soon as possible.

It is obvious that ignoring pollution in order to keep economic growth is short-sighted and stupid. Drafting legislation is only the first step. Implementation is more important. I hope this time, public and media can oversee the government to make new policy and implement effectively!

These days, I believe that the most serious pollution problem is the air pollution in Beijing. Since I’m from Beijing, I feel pretty worried about the whole air pollution thing.

Last week, when I was talking to my mother through phone, my mom told me that the sky was becoming grey these days and news about the air pollution was announced through TV, internet and newspaper. In a word, everyone was talking about the serious pollution. How bad is it? Well, the Air Quality Index (PDF topped out at 755 ppm at a monitoring station at the U.S. Embassy (on a scale of 500). The World Health Organization suggests that it should not be above 20 and more than 300 is hazardous! When I told these to my parents, they were shocked. Since the news only announced PM2.5, they don’t know exactly how bad it is!

This terrible air pollution will not only threat people’s health, it can also make the whole society unstable since people can easily hate the government because of its ineptitude and corruption. We must do something to deal with the pollution!

The government try to make some short run policy to make the air pollution index looks better. Some factories were ordered to shut down temporarily, 30% government cars are not allowed to drive, construction and demolition are ordered to stop and burning coal is limited. As we know, these policies will be abandoned as soon as the air pollution index looks better. So, I believe, some long run measures must be taken.

First of all, all the factories should abate their emission. In order to do this, the government can impose pollution tax or providing quota. The government can also provide subsidy to help factories improve their equipments. Second, old cars should be put out to pasture. Since controlling automobile exhaust gas pollution can help to reduce air pollution. Third, using Denitration of Coal-fired boiler should be required. Last but not least, I believe the structure of economy should also change. We should try to found more high level design center instead of low level sweatshop. These factories are the main factor of the pollution.

Let Beijing be Beijing, not “Greyjing”!

1.http://www.brecorder.com/markets/commodities/america/92107-cbot-wheat-ends-up-on-weak-dollar-us-export-data-.html

Wheat futures on the Chicago Board of Trade crept higher for a fourth straight session on Friday, supported by a weaker US dollar and higher-than-expected weekly US wheat export sales, traders said.

2.http://www.brecorder.com/markets/commodities/america/92106-grains-week-ahead-corn-closing-the-gap-on-soybeans-.html

US corn prices are faring relatively better than those for soybeans, with the gap between the two narrowing from the widest in more than four years in September to just nine months now. And expectations are for corn to continue closing the spread with soybeans as export demand picks up due to shrinking supplies of corn in South America and feed wheat in Europe.

3.http://www.brecorder.com/markets/commodities/america/92011-argentina-201213-soy-area-seen-1935mn-hectares-govt-.html

Argentina’s 2012/13 soybean planting area is expected to be 19.35 million hectares, the Agriculture Ministry said in its monthly crop report on Thursday, leaving its previous forecast for the season unchanged. The Argentine government says the country can produce 55 million to 58 million tonnes of soybeans this crop year if the weather cooperates.

4.http://www.brecorder.com/markets/commodities/america/92107-cbot-wheat-ends-up-on-weak-dollar-us-export-data-.html

Wheat futures on the Chicago Board of Trade crept higher for a fourth straight session on Friday, supported by a weaker US dollar and higher-than-expected weekly US wheat export sales, traders said. CBOT grain trade closed two hours early because of the US Thanksgiving holiday weekend. CBOT December options expired at the close, with moderate open interest at the $8.50 strike helping to keep front-month wheat futures from falling very far below that level.

Next week, instead of wheat, I’m going to pay more attention on soybean and corn.

First, let’s look at some news about soybean from USDA report. USDA reported export sales of US soybeans in the latest week at 543,600 tonnes, within a range of trade estimates for 400,000 to 650,000 tonnes. USDA pegged weekly US soymeal sales at 197,800 tonnes, slightly below a range of trade estimates for 200,000 to 300,000 tonnes. USDA reported weekly US soyoil sales at 124,000 tonnes, well above a range of trade estimates for 50,000 to 70,000 tonnes. USDA through its daily reporting system on Friday confirmed sales of 20,000 tonnes of US soyoil to unknown destinations for 2012/13 delivery. As we can see from above, the price of soybean may increase because of the increasing demand.

Now, let’s look at corn. The point was underscored in the weekly export sales report from the US Department of Agriculture on Friday. Corn sales totaled 958,600 tonnes, the highest in about 10 weeks. And Japan, the world’s largest importer of corn that has been buying cheaper feed from alternative sources, bought 646,500 tonnes of corn from the United States last week — the largest weekly purchase in nearly two years. Months of incessant rains in Argentina, the world’s No 2 corn exporter after the United States, have delayed the seeding of the crop, leading the country’s government to revise down the planted area to 4.7 million hectares from 4.97 million. These news show that corn price may increase too. Due to less supply and more demand.

Strategy for next week, go long on soybean and corn.

Last week, my Equity is 33867.67. I went long on wheat 2 weeks ago and I’m still losing money. Now, I’m afraid that I can’t win that part of money back although last week, the wheat price did increase a little. Now, let’s see what happened last week.

Argentina’s government cut this season’s wheat output forecast, citing three months of heavy rains that started in August and flooded key parts of the Pampas farm belt, the Agriculture Ministry said on Thursday. The South American grains powerhouse is seen producing 11.1 million tonnes of wheat in the 2012/13 crop year, down from the government’s previous forecast of 11.5 million tonnes, the ministry said in its monthly crop report. Due to this news, the price of wheat may increase since there will be less wheat supply in Argentina

USDA reported export sales of US wheat in the latest week at 657,500 tonnes (635,500 for 2012/13), above a range of trade estimates for 200,000 to 400,000 tonnes. The increasing demand will also push the price up. At the same time, Ukraine’s grain traders are ready to halt milling wheat exports on an informal basis as they approach a critical limit, in order to protect the domestic market after a poor harvest, the agriculture ministry said on Friday. This will also push the price up. As we can see, with less supply and more demand, the price did increase last week.

1.http://www.agweb.com/article/u.s._corn_and_soybean_production_forecasts_are_larger_than_expected/

U.S. Corn and Soybean Production Forecasts Are Larger Than Expected. Today, the USDA released new forecasts of U.S. and world crop production as well as updated forecasts of 2012-13 marketing year consumption. Following is a brief summary of the new forecasts and implications for corn, soybean, and wheat prices.

2. http://www.agweb.com/article/coverage_analysis_of_the_nov_9_usda_reports/

Coverage, Analysis of the Nov. 9 USDA Reports. See all of the report data, coverage and analysis of the Nov. 9 World Agricultural Supply and Demand Estimates and Crop Production reports.

3.http://www.agweb.com/article/demand_gnaws_at_higher_than_expected_soybean_production/

Demand Gnaws at Higher-Than-Expected Soybean Production. Many U.S. producers likely will be worried about the soybean situation coming off of Friday’s USDA production estimates, says Kevin Van Trump, owner of Farm Direction. While the government raised production unexpectedly high—up 1.5 bushels from last month to an average yield of 39.3 bushels per acre–most of those gains were chewed up by demand.

4.http://www.brecorder.com/markets/commodities/america/89849-us-soy-crop-up-4pc-supply-strain-eases-.html

US soy crop up 4pc, supply strain eases. WASHINGTON: The US soybean crop is much larger than expected, thanks to late-season rains that blunted the impact of the worst drought in half a century, and the corn crop also is marginally larger, the government said on Friday.

I believe that next week, wheat price will still go up. The most important reason is still the point that the harvest is coming to an end. There are some other reasons too.

First of all, the market’s focus remained on wheat as expectations of smaller crops in places like Argentina and Australia, coupled with dry conditions in key growing areas of the US Plains, provided support to a commodity that has been stuck in a narrow trading range for months. The supply is decreasing. The price will go up.

Secondly, “Kansas, Colorado and Nebraska are dry and global wheat stocks are falling. At some point this winter wheat business is going to shift back to the US. That time is getting pretty close,” a wheat trader on the floor of the Chicago Board of Trade said. USDA also was seen cutting its global wheat stocks forecast for the second month in a row due to weather-related problems in key growing areas such as Ukraine, Australia and Argentina.

Thirdly, Australia, the world’s second-largest wheat exporter, is expecting a much smaller crop this year, with early harvest showing lower protein scales and poor yields. Traders said rains forecast over the nation’s east coast could slow the harvest. Asia’s top buyers, who rely on Australia for the bulk of their milling wheat supplies, may be forced to import larger volumes of high-protein spring wheat from the United States and Canada. This will also rise the wheat price.

The strategy for next week is really easy. I will go long for two contracts. I believe the price will rise a lot next week.