Wheat prices climb to record highs amid global demand

Prices for rice, the staple in Asia, at the Chicago Board of Trade hit an all-time high. Soyoil, widely used in cooking, and soymeal, a protein-rich animal feed, surged by the daily trading limits amid across-the-board buying by investors.

Coming off a banner year amid burgeoning investments by managed money, grain futures at the world’s largest grain exchange have been building on the gains of 2007 supported by fundamental factors like tight supplies and strong exports.

Wheat gave signal of the day’s bull run by rising sharply in Asian trade. European wheat prices rose to their highest levels in more than four months.

“Wheat shot out of the box limit-up and that took everything else up. Speculative money is coming in and the open interest reflects that every day,” said Vic Lespinasse, an analyst for Illinois Grain.

The rally in wheat boosted prices for CBOT corn and soybeans, but a bout of profit-taking took the markets lower.

CBOT March corn ended 7-3/4 cents lower at US$5.01-1/2 per bushel after rising to a high of US$5.28-3/4. The 2009 July contract rose to US$5.56-3/4, which marked the highest for any corn contract, surpassing the US$5.54-1/2 peak set in 1996.

CBOT March soybeans ended 4-1/2 cents lower at US$13.18-1/2. July rose to an all-time high of US$14.05 a bushel.

CBOT March soft red winter wheat rose its 30-cent daily limit to a high of US$10.33, while May likewise staged a limit-up advance to an all-time high of US$10.49-3/4.

Minneapolis Grain Exchange March spring wheat also rose by the daily limit to US$14.93 a bushel, the highest price for any U.S. wheat futures contract.

European benchmark March wheat rose as much as 15.50 euros to a four-month high of 276.00 euros per ton before settling at 273.75 euros, up 13.25 euros on the day.

There were fresh signs Wednesday that record high prices for wheat had yet to dent demand from importing nations.

Egypt, one of the world’s largest importers of wheat, bought 150,000 tons of the grain, including 25,000 tons from the United States, the world’s top exporter of wheat.

“That is such an important factor in the wheat market,” said grains analyst Bill Nelson of A.G. Edwards, referring to the purchase by Egypt.

“Egypt is being seen as a proxy for world grain buyers who are, in general, willing to buy grain even at record prices. This is evidence that day after day of record prices are not limiting demand,” he said.

Nelson said a casualty of the high corn and soybean price would be the livestock sector due to the resultant increase in feed prices. “Feed is such a huge portion of the cost.”

Lars Steffensen, managing director of commodity trading at Ebullio Capital Management, saw the grains market staying firm, within limits.

“I wouldn’t expect grains to come off any time soon. On the other hand, I think until we actually know exactly what the fundamental picture is. I don’t think you are going to see it rally another 10 or 20 percent from here,” he said.

In Asia, traders stressed investment funds’ significant impact on the market.

“Wheat is surging by the power of investment funds. Of course, bullish fundamentals are behind this, but this rally is simply too much,” a trader at a Japanese farming cooperative said.

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