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Wheat prices since 2002 have biggest gain { January 2008 } Original Source Link: (May no longer be active)
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_7VbV5LMzAs&refer=homehttp://www.bloomberg.com/apps/news?pid=20601087&sid=a_7VbV5LMzAs&refer=home
Wheat Breaches $12 for First Time After Biggest Gain Since 2002
By Jae Hur
Feb. 26 (Bloomberg) -- Chicago wheat prices rose by the most in more than five years, breaching $12 a bushel for the first time as investors poured money into agricultural commodities on signs that global crop production isn't keeping pace with demand.
Global wheat stockpiles will probably fall to a 30-year low this year, while corn inventories are headed for the lowest since 1984, the U.S. Department of Agriculture said Feb. 8. Almost $1.5 billion flowed into farm commodities in the week to Feb. 19, investment bank UBS AG said in an e-mailed report yesterday.
Wheat, soybeans, corn and palm oil are among commodities that have touched records this month, stoking prices of bread, pasta and noodles worldwide. The gains have driven up costs for food companies from Kellogg Co. to Nissin Food Products Co. and complicated efforts to curb prices in China, India and Malaysia.
``Speculators keep jumping into the market as supplies are very tight globally, especially spring wheat,'' Takaki Shigemoto, an analyst with Tokyo-based commodity broker Okachi & Co. Dry conditions in some wheat-producing areas in northern China and also lent support, he said.
Wheat for May delivery rose by the daily limit of 90 cents, or 8 percent, to $12.145 a bushel in after-hours trading on the Chicago Board of Trade, the biggest one-day percentage gain since October 2002. It stood at $11.975 at 3:50 p.m. Singapore time.
The exchange expanded its daily limit after the contract surged by the previous 60-cent limit yesterday.
Stockpiles Shrinking
Record prices, led by scarce high-protein varieties, have not deterred buyers. Export sales from the U.S., the world's largest shipper of the grain, are up 56 percent since June 1 compared with the same period a year earlier.
Global wheat stockpiles may fall to 109.7 million metric tons by May 31, while corn inventories may decline to 101.9 million tons as of Oct. 1, the U.S. government estimated Feb. 8.
U.S. inventories of wheat will drop to 272 million bushels, or 7.4 million tons, the lowest for the end of the marketing year since 1948, according to the USDA. Hard-red spring varieties, traded in Minneapolis, are in short supply as dry weather curbed output last year in the U.S. and Canada.
On the Minneapolis Grain Exchange, wheat for May delivery advanced $1.35, or 7.9 percent, to $18.4325 a bushel. The March contract, which has no limit because it is the closest to delivery, rose as high as $24.26 a bushel, after yesterday becoming the first U.S. wheat contract to top $20 a bushel.
On the Kansas City Board of Trade, hard-red winter wheat for May delivery also rose as much as the 90-cent limit, or 7.7 percent, to $12.65 a bushel and last traded at $12.47.
Rising Costs
Fourth-quarter earnings at Kellogg Co., the largest U.S. cereal maker, fell 3.3 percent as price increases failed to keep pace with the higher expense of making Eggos, Frosted Mini-Wheat cereal and cookies. Sara Lee Corp., a bread and cake maker based in Downers Grove, Illinois, raised the price of a loaf 20 cents between September and December.
Shares of Nissin Food, Japan's biggest instant-noodle maker, fell 7.2 percent today. The stock fell 18 percent in 2007, the biggest annual decline since 1990, according to Bloomberg data.
Goodman Fielder Ltd., Australia's largest baker, which today posted a 26 percent drop in first-half profit, said it expects commodity costs to rise about A$210 million ($195 million) this year, 17 percent more than forecast in November.
Producers and exporters may benefit from higher prices. AWB Ltd., Australia's largest wheat exporter, gained as much as 5.8 percent, to A$2.38 and closed at A$2.35.
The low stockpiles have added to concern the world's farmers may not be able to grow enough to meet demand for making products from cereals to noodles. Food inflation last year rose 4.7 percent in the U.S., the fastest pace since 1990.
Even farm animals, which eat 16 percent of the world's wheat, are driving consumption as feed made from alternatives such as corn gets more expensive. The appeal of corn-based ethanol is increasing as the U.S. government sets mandates for alternative energy sources.
Export Taxes
The rise in wheat prices has prompted some governments, including China, to impose export taxes on grains to ensure adequate domestic supply and curb price rises.
Kazakhstan, the world's fifth-largest wheat exporter, said it plans to impose export tariffs, the Financial Times reported today. Kazakhstan wants to limit exports in an effort to control domestic inflation, which is almost 20 percent, the report said, citing Agriculture Minister Akhmetzhan Yesimov.
Corn in Chicago declined as much as the daily price limit, falling for the first time in eight days, and soybeans fell for the first day in four after they reached records yesterday on signs that global crop production isn't keeping pace with demand.
Corn futures for May delivery, which reached $5.55 a bushel yesterday, fell as much as 3.7 percent to $5.27 and traded at $5.3625 at 3:52 p.m. Singapore time. Corn is up 18 percent this year. Soybeans for May delivery, which rose to $14.855 a bushel yesterday, declined as much as 1.8 percent to $14.4275 and stood at $14.55 at 3:57 p.m. in Singapore. Futures have gained 87 percent in the past year after U.S. farmers planted the fewest acres in more than a decade.
Last Updated: February 26, 2008 03:51 EST
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