Wheat continues to surge above $10 a bushel
— -- U.S. wheat prices continued to soar Wednesday as export demand remained robust despite record high prices, with values in the United States rising by the maximum allowed in a trading day and helping to rally corn and soybeans.
Overall, wheat prices have doubled since last June at the Chicago Mercantile Exchange cme, which owns the Chicago Board of Trade. Prices have been pushed higher by surging world demand and bad weather in some major producing nations.
"For the near-term price, it's still heading higher," says Joe Victor, vice president of marketing at Allendale, a commodity research firm. He says prices will stay elevated until the markets get a better handle on potential production in coming months. "If we have good weather, plenty of plantings, then there's likely a price correction," Victor says. "If it's bad weather … (prices will) continue their upward trends."
There were fresh signs that record high prices for wheat had yet to dent demand from importing nations.
Egypt, one of the world's largest importers of wheat, bought 150,000 tons of the grain, including 25,000 tons from the United States, the world's top exporter of wheat.
"That is such an important factor in the wheat market," says grains analyst Bill Nelson of A.G. Edwards, referring to the purchase by Egypt.
"Egypt is being seen as a proxy for world grain buyers who are, in general, willing to buy grain even at record prices. This is evidence that day after day of record prices are not limiting demand," he says.
The May futures contract for Chicago soft red winter wheat, used in cakes and crackers, jumped by the daily limit of 30 cents to an all-time high of $10.50 a bushel. The nearby March contract rose its 30-cent daily limit to a high of $10.33. Wheat prices briefly jumped to more than $10 a bushel in December.
Minneapolis Grain Exchange March spring wheat also rose by the daily limit to $14.93 a bushel, the highest price for any U.S. wheat futures contract. High-protein spring wheat, prized by millers and bakers for its quality, is forecast to have the smallest surplus in at least 30 years, and harvest doesn't start till August. The Minneapolis Exchange will raise the daily trading limit to 40 cents, beginning Feb 12.
Trading on Tuesday was influenced by a Canadian government report showing the wheat supply in that nation plummeting 30% from December 2006 to December 2007. The sharp drop was mainly caused by a more than 20% dip in wheat production last year.
The U.S. Department of Agriculture expects the U.S. wheat surplus this year to be the smallest in 60 years. Despite higher prices, U.S. plantings of winter wheat rose only about 4% from last year. Farmers had been expected to increase plantings by far more.
Prices for corn, soybeans and other grains have also surged in recent months. That helped push U.S. food inflation up to 4.9% in 2007 from 2.1% in 2006. The impact has been far greater in less-affluent nations, where people spend more of their income on food.
Merrill Lynch analysts in a recent report said the rate of what they call "agflation" could slow if economic growth cools. But costs will remain elevated. "Longer term, however, we remain convinced that agflation will be an important issue for consumers and policymakers alike," the Merrill Lynch report said.
Contributing: Reuters