February 27, 2008

 

Wheat hits US$12, highest in 6 years as stockpiles shrink

 

 

US wheat prices breached US$12 a bushel, the first since 2002, as investors poured money into the crop due to the projected 30-percent drop in global wheat stockpiles.

 

Wheat, soy, corn and palm oil are among commodities that have hit records this month, stoking food prices worldwide.

 

Around US$1.5 billion flowed into farm commodities in the week to February 19, investment bank UBS AG said.

 

Takaki Shigemoto, an analyst with Tokyo-based commodity broker Okachi & Co., said speculators keep jumping into the market as supplies are very tight globally, especially spring wheat.

 

Dry conditions in some wheat-producing areas in northern China further stoked the record wheat prices.

 

Wheat for May delivery shot up to 90 cents, or 8 percent, to US$12.15 a bushel in after-hours trading on the Chicago Board of Trade, the biggest one-day percentage gain since October 2002.

 

The exchange expanded its daily limit after the contract surged by the previous 60-cent limit yesterday.

 

Wheat export sales from the US, the world's largest producer of the grain, climbed by 56 percent since June 1, on-year.

 

The US said February 8 that global wheat stockpiles may plummet to 109.7 million tonnes by May 31, while corn may decline to 101.9 million tonnes as of October 1.

 

US inventories of wheat are estimated to fall to 272 million bushels, or 7.4 million tonnes, the lowest since 1948, the USDA reported.

 

The dwindling stockpiles have aggravated concerns that the world's farmers may not be able to grow enough to meet demand for making products from cereals to noodles. Food inflation last year rose 4.7 percent in the US, the fastest pace since 1990.

 

Furthermore, the rise of wheat prices has prompted some governments, including China, to impose export taxes on grains to ensure sufficient domestic supply.