August 31, 2007

 

Global wheat prices set record highs amid supply woes, strong demand

 

 

Wheat futures in US and Europe soared to all-time highs on Thursday (August 30) on strong technical momentum despite thin global supplies and heavy export demand, traders said.

 

As of 11:40 a.m. CDT (1640 GMT), the bellwether December wheat contract on the Chicago Board of Trade (CBOT) was up 29 cents, nearly 4 percent, at US$7.87-1/2 per bushel after rising the daily maximum of 30 cents to US$7.88-1/2, the record high price for any CBOT wheat contract.

 

Daily limits were lifted in the spot September contract as it neared its delivery period. September climbed 32 cents to US$7.74, the all-time high for a spot month.

 

CBOT corn and soybean futures also increased, lifted by the surge in wheat. CBOT December corn was up 4 cents at US$3.44-1/4 per bushel and November soybeans were up 14-3/4 cents at US$8.89 a bushel.

 

The wheat market received a boost from weekly US export data as the US Department of Agriculture reported its weekly export sales of US wheat at 1,231,900 tonnes, above trade estimates for 700,000 to 1,100,000 tonnes.

 

In Paris, benchmark November milling wheat was up 11.00 euros, or 4.5 percent, at 255.5 euros per tonne after hitting an all-time high of 256.75 euros. The price was the highest paid for a tonne of wheat on Euronext since they started in 1998.

 

The November contract has risen more than 90 percent in the past five months.

 

All Euronext futures contracts, including those for the 2008/09 season, followed the move and set new contract highs.

 

Prices also rose sharply in London with November feed wheat futures peaking at 175.00 pounds a tonne, a record for the front month, up 5 percent on the day. Prices in Britain have doubled since early April.

 

The USDA has projected that world wheat stocks will drop to 114.8 million tonnes by the end of the 2007/08 marketing year, a 26-year low on poor weather in some parts of Europe and the United States.

 

Traders have also been monitoring dry conditions in Argentina and Australia that could threaten developing wheat crops in the Southern Hemisphere.

 

India's willingness to pay up to US$400 per tonne (cost and freight included) at its wheat import tender -- which attracted bids for more than half a million tonnes -- served as an illustration of global tightness.

 

A Seoul-based trader said India's purchase will definitely reduce stocks more and push prices up.

 

But Iran, Egypt, Iraq and Morocco also need cover and recent large sales of Russian wheat reinforced traders' fears that Moscow could tax wheat exports to safeguard shrinking stocks.

 

A pullback of Russia would lead to delivery defaults on Egypt that would have to be filled by other origins, a trader said.

 

Market nervousness was also fanned by a lack of rain in Australia just before wheat flowering.

 

Compared with initial forecasts of a near-record crop of up to 26 million tonnes, dry weather has shrunk expected output to 20 million to 22 million tonnes, according to industry forecasts.