Wheat hits record as global demand depletes supply

WASHINGTON -- Wheat prices hit a record $10 a bushel Monday as traders worried about tight world supplies and the United Nations called for urgent steps to aid poor nations that are being pummeled by shrinking food stockpiles and historic cost run-ups.

Wheat futures contracts for March delivery surged above $10.09 per bushel in trading in Chicago, before closing at $9.66 — about double the price of a year ago. Grain prices have soared in recent months, with corn at $4.39 a bushel, compared with about $3 in 2006, and soybeans at more than 30-year highs. Dairy and rice prices have also jumped.

Wheat prices are jumping for a number of reasons, including bad weather in such exporting nations as Australia. Demand is rising in rapidly developing economies such as India and China. The picture is further complicated by the fact that a growing share of U.S. cropland is being devoted to corn for ethanol.

Though there are a number of factors, "All of these markets are moving higher based on the growth in biofuels, which is made economical due to the high prices for energy," says David Lehman, director of commodity research and product development for the CME Group, which owns the Chicago Board of Trade.

"While corn is the commodity that's used directly, corn, wheat and soybeans all compete to some degree for the same acreage," Lehman says. He notes that current prices are not the highest in inflation-adjusted terms.

The Agriculture Department recently forecast that U.S. wheat stocks this year would fall to a six-decade low. World grain stocks are the tightest in three decades. Consumers have felt the price run-up. Retail food prices have risen at a 5.3% annual rate so far this year, compared with 2.1% for all of 2006.

Tom Jackson, senior economist at economic forecasting firm Global Insight notes some millers are having a hard time finding wheat supplies, let alone worrying about cost.

"When you're talking about the price increases that you're seeing for flour and other kinds of inputs, it's definitely being passed along," Jackson says.