September 7, 2007

Feed wheat reaches record high on markets

London feed wheat futures moved closer to GBP200 a tonne last night after another day of drama on international markets.

November futures closed up GBP8.50 (US$17.16) a tonne at a record GBP186.50 (US$376.65). January rose similar levels to GBP188, while May and July next year all hit GBP192. Paris rose as high as GBP190 for November. Driving markets yesterday were worries of possible grain export restrictions in Russia and a rally in the US on heavy export demand.

Wheat prices since March essentially doubled on fears of the impact of poor weather and drought will have on crop yields. Adding to the problem is that world grain stocks are at their lowest level for 25 years.

A Russian working group, comprising industry, traders and government representatives, is due to meet next Thursday to discuss whether to introduce export limits or tariffs for any sale of grain from the state's intervention stocks. European traders will also raise the question of raising export tax and how and when will be implemented.

Traders do not see any easing in the current pressure on grain prices. Those in Paris say 300 euros (US$410) a tonne is now the objective of markets. Sean Corrigan, chief investment at Diapson Commodities Management, said: "The days of effortless and easy surpluses - particularly on cereal and grain crops - are behind us."