March 23, 2004
US Wheat Prices Rise Sharply As Feedmillers Switch Grains
Wheat futures in Chicago rose to their highest price in almost seven years on speculation that livestock producers will use more of the grain as animal feed because of surging costs for corn and soybeans.
Corn, which accounts for about 80 per cent of U.S. livestock feed, is at a seven-year high, and soybeans have almost doubled to a 15-year high, boosting the cost of soybean meal used to feed cattle, hogs and chickens.
"Wheat becomes additionally attractive because it has higher protein levels than corn," said Dale Gustafson, a grains analyst with Citigroup in Chicago. "It's possible that if corn and beans move higher, wheat might move higher."
Wheat for May delivery rose 30 cents (U.S.), or 7.6 per cent, to $4.227 a bushel on the Chicago Board of Trade, the highest closing price since May, 1997, and the biggest one-day gain since Oct. 15, 2002.
The price of wheat has risen about 12 per cent this year, below the 30-per-cent gains of corn and soybeans over the same period. Wheat is up 49 per cent from a year ago.
About eight pounds of feed is needed to add one pound of weight to a 750-pound steer. Most cattle in the United States are fattened to 1,250 pounds before they are slaughtered.
In other markets, soybean futures had their biggest gain in almost two weeks as a four-day shutdown of Brazil's biggest grain port halted shipments from the world's second-largest exporter.
The disruptions at Paranagua have paralyzed Brazil's soybean exports just as farmers deliver newly harvested supplies. Trucks carrying soybeans formed a line 100 kilometres long at the port. The delay extended to 85 per cent the rally in prices over the past year after a drop in U.S. production and surging global demand for soy-based animal feed.
"Nobody can get any beans out of there, and we can't afford to have anybody get any of our beans, so prices are going to have to go up," said Troy Vetterkind, a trader at eHedger in Chicago. Fifty ships are delayed at Paranagua, he said.
Soybeans for May delivery rose 31.75 cents, or 3.1 per cent, to $10.5575 a bushel in Chicago, the biggest gain since March 9 and the highest closing price since July, 1988.