January 27, 2011

 

Global wheat demand sends prices to new peaks

 

 

Chicago and Paris wheat prices were set at two-year highs, with London on a record, on Wednesday (Jan 26), as talks of stockpiling intensified amongst major importers due to talk of Algeria hastening its purchases.

 

Chicago wheat for March touched US$8.59 a bushel, the highest level for a spot contract since August 2008.

 

Paris wheat for the same month reached EUR267.25 (US$ 366.17) a tonne in late deals, the best price for a near-term lot since March 2008, while London wheat added 1.2% higher to an all-time high of GBP203.50 (US$323.87) a tonne.

 

The rises came amid a rash of further news and speculation on orders from Middle Eastern and North African nations unsettled by unrest in countries such as Algeria, Egypt and Tunisia this month blamed in part on rising food prices.

 

Algeria, the world's fourth-ranked wheat importer, confirmed the purchase of 800,000 tonnes of wheat, bringing known purchases this month to 1.75 million tonnes, excluding hefty purchases of durum, the variety used to make pasta.

 

Indeed, the country was reported to be enacting plans to accelerate grain purchases.

 

Traders are expecting news on an Iraqi tender, while "rumours this morning have Saudi Arabia looking purchase up to 500,000 tonnes of wheat", US Commodities said.

 

While Egypt, the top importer, said it was not altering its purchasing strategy, and that it had enough wheat supplies for six months, that was "not necessarily how the market was trading it", Jonathan Lane, trading manager at UK merchant Gleadell, said.

 

"You wouldn't want to be in Egypt's position," he said.

 

Indeed, wheat supplies were harder to secure than might first appear from apparently robust global stocks estimates, with the grain fighting for port space with corn and soy in the US, and in Australia, thanks to the unusually eastern-weighted crop, being handled by facilities not fitted for such large volumes.

 

"At the moment, the only place you can buy and physically ship milling wheat out is France," the top European producer and exporter of the grain where waning stocks have already provoked concerns about the level of shipments.

 

UK exports, meanwhile, have been running at twice last season's levels, according to customs data.

 

The drain on European Union supplies has prompted talk of the region's own buyers turning as far as Australia for replacement supplies before the harvest replenishes silos, with the European Commission yet to decide on an E12-a-tonne levy, and quota levels, on imports.

 

Jaime Nolan at FC Stone, flagging Spanish interest in Australian feed wheat, noted that the grain would cost some US$305-310 a tonne to import, including freight.

 

Lane noted that, with the backlog of Australian orders, it may take until April or May to discover the truth in speculation of purchases from the country.