September 3, 2007

US wheat prices surges to 30 percent

US wheat prices ended the week strongly as fundamentals outweighed recent hedge-fund selling and concerns about the health of the US economy.

Wheat prices led the complex as renewed food-import demand put further pressure on extremely tight supplies. The cereal has gained almost 30 percent in the US market this month, the largest monthly gain since August 1973.

Euronext.liffe November milling wheat on Friday (August 31) rose in Paris to a record high of 272 euros a tonne. Later it traded just 3.75 euros higher at 258.5 euros a tonne on profit-taking.

December wheat futures in the Chicago Board of Trade (CBOT) rose above the US$8-a-bushel level to an all-time high of US$8.07¾ a bushel. Profit-taking later sent prices a ¼ cent down on the day to US$7.84¼ a bushel.

Wheat prices surged almost 10 percent on the week in Chicago and more than 15 percent in the European market.

South Korea on August 31 purchased new wheat cargoes to lift its inventories, and India is expected to buy more wheat in the next week.

The sharp price increases reinforce fears of a spike in food inflation, as the food industry begins to pass on the higher costs to consumers.

Cereals traders were also concerned about the southern hemisphere crop, in particular any weather damage to the Australian crop. The possibility that Russia might reduce its cereal exports to keep its domestic market well supplied contributed to higher prices.

CBOT December corn lost 4.3 per cent on the week to US$3.42½ a bushel, while CBOT December soybeans gained 2.9 per cent to US$8.89¼.