Wheat prices, which have been strong for two years, have set record highs since the fall on a combination of crop failures in several key wheat-producing regions and strong demand for wheat-foods.

 

Coupled with increased investor demand for alternative investments, wheat prices shot higher.

 

Since the end of 2007, wheat prices at the Minneapolis Grain Exchange (MGE), the smallest of the US wheat futures markets, have more than doubled in price and have pulled up values at the Kansas City Board of Trade and the benchmark Chicago Board of Trade, both of which trade different types of wheat. 

 

Strong volume and expanded daily trading limits may have contributed to the volatility in wheat, traders said. However, the MF Global situation was the main thing that caused the market to gyrate, said Vic Lespinasse, analyst for Illinois Grain and a veteran CBOT floor trader.

 

On Wednesday, the most-actively traded May wheat contract at the CBOT climbed the exchange-imposed limit of US$1.35 within minutes of trading near the down-limit. KCBT May wheat hit a new high and traded within a range of more than US$2. These moves represented historic price swings.

 

The current rally in wheat prices gained momentum after the USDA said in a mid-January report that US winter wheat plantings did not expand as much as the industry expected. Acres for spring-planted wheat would need to expand greatly in order to rebuild US wheat supplies, which are at a 60-year low.