August 31, 2007

Paris November wheat leaps 3 percent to new record high

Liffe's Paris-based milling wheat milling wheat futures moved sharply higher Thursday (August 30) on continued nervousness over historically tight global wheat supplies amid sharp gains in Chicago Board of Trade (CBOT) wheat futures late Wednesday and in overnight dealings.

November was up EUR7.50 (US$10.24), or 3.1 percent, at EUR252 (US$344.39) a tonne with 387 lots traded, as of 0850 GMT.

This was well above the previous record high of EUR244.75/tonne set two sessions ago and represented a 96 percent increase from the April low in the second-month continuation charts.

Following Wednesday's close in the Paris market, CBOT wheat futures soared to fresh record highs and then extended those gains in overnight dealings. This provided the impetus for Paris prices to jump.

A French trader said the market is "puzzled" by such sharp gains and so far many dealers, especially on the cash market, have moved to the sidelines.

In its August report, the US Department of Agriculture forecast 2007-08 world wheat ending stocks to be at their lowest level since the early 1980s. But this number is expected to be trimmed in future reports on trade ideas that more crop problems need to be factored in.

Thus the market is now closely focused on crop developments in Australia and Argentina. The trader said the Australian crop still has plenty of time to benefit from rain, but there could be trouble if it remains dry.

Production estimates for Australia now mostly range from 20 million to 22 million tonnes. However, due to a lack of rain those estimates could "drop into the teens", Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia, told Dow Jones Newswires.

1 Euro = US$1.3665 (As of August 31, 2007)