LONDON, Aug 23 (Agencies): Wheat prices jumped to an all-time high on Thursday as panicked buyers rushed into the market amid extremely tight supplies, raising fears of a global food inflation spike.
Canada, the world's second largest wheat exporter, warned output might be almost 20 per cent below last year as adverse weather damaged the crop as it had done in Europe and Australia.
Japan and Taiwan, which depend on foreign wheat supplies, bought new cargoes in the international market while India launched a large tender to beef up its inventories ahead of its peak demand season.
Gavin Maguire, a grain analyst with Iowa Grain in Chicago, said the combination of disappointing production levels and very strong demand were pushing up prices. "Wheat buyers are beginning to panic," Mr Maguire said.
In Chicago, wheat for December delivery surged to an all-time high of $7.54 a bushel. Prices have jumped 110 per cent in the past 12 months and have risen threefold since 2000.
Food industry executives warned that meat, poultry and dairy prices would climb in the short term as farmers and processors passed on higher feed costs to consumers.
Alex Waugh, director-general of the UK Flour Milling Association, said the cost of wheat was at an unprecedented level: "Wheat costs for flour millers in the UK now stand some £500m higher than last year. This has yet to come through in wholesale or consumer prices."
The International Grains Council cut its estimate for the 2007-08 wheat crop to 607m tonnes while forecasting demand would reach 614m tonnes, resulting in a further stock drawdown. It said global wheat inventories were at their lowest since 1979.
James Gutman, of Goldman Sachs in London, said: "Buyers are scraping the bottom of the bushel of the inventories."
Another report adds: Taiwan Flour Millers Association said today it intends to buy 92,000 tons of US wheat. Japan bought 30,000 tons of Canadian wheat, and India said it wants to buy 100,000 tons. The US has forecast global inventories will fall to the lowest level in 26 years.
``Even when another country makes a sale of wheat, it's bullish for us because it's pulling more wheat off the market,'' said Jason Britt, an analyst at Central States Commodities in Kansas City, Missouri. ``It just shows how tight world stocks are.''
Wheat futures for December delivery rose 4.75 cents, or 0.7 percent, to $7.365 a bushel at 11:45 a.m. on the Chicago Board of Trade, after touching a record $7.54. Most-active futures have more than doubled in the past year as production fell in several exporting countries, including the US, Canada and Australia.
Advance sales of US inventories have risen 90 percent from June 1 through Aug. 16 compared with the same period a year earlier, the US Department of Agriculture said today. US exporters sold about 15.3 million metric tons of wheat during that time compared with 8.1 million tons a year earlier, the USDA said.
Actual shipments of US supplies have risen 30 percent from the year-earlier period to 6 million tons, the USDA said today. US exporters sold 1.053 million tons of wheat last week, the government agency said.
``Anytime you see over a million tons a week it's psychologically bullish,'' Britt said.
Prices are also being supported by harvests expected to be smaller than normal in several countries. Canadian growers may produce their smallest wheat crop in five years because of reduced plantings and dry weather that damaged spring wheat, a government survey showed. Canada is the second-biggest exporter of wheat behind the US
“Hot, dry weather back in July damaged some'' developing crops over western growing areas of Canada, agricultural forecaster Meteorlogix LLC, based in Woburn, Massachusetts, said in a report today.
Production in the European Union is forecast to fall 38 percent by May 31 from a year earlier, the USDA said, because drought followed by excessive precipitation harmed plants in France, the biggest grower in the EU, Germany and the U.K. An additional 1.5 inches of rain is expected in France and Germany in the next 48 hours, Meteorlogix said.
Wheat for November delivery on the Liffe Exchange in Paris rose 8.5 euros, or 3.7 percent, to a record 240.25 euros per metric ton, or $8.87 a bushel.
Global stockpiles are expected to fall to 114.8 million metric tons by May 31, the lowest in 26 years, the USDA said this month. Australian production, which the USDA said fell 61 percent to 9.9 million tons during the marketing year that ended May 31, may be hurt because of dry and warmer-than-normal weather.
Higher prices may cause users of the grain including Kellogg Co., the largest US cereal maker, to raise prices to retailers who will probably pass on the increase to consumers.
Wheat, valued at $7.7 billion in 2006, was the fourth- biggest US crop, behind corn, soybeans and hay, according to US government data.
Wheat prices jump to record high
FE Team | Published: August 25, 2007 00:00:00 | Updated: February 01, 2018 00:00:00
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