Wheat Price Surges Above $10 for First Time on Supply Concerns
Wheat rose above $10 a bushel for the first time, leading other grains and oilseeds higher in a food price spiral that threatens global economic growth.
Chicago wheat futures jumped as much as 30 cents, or 3.1 percent, to $10.095 as dry weather threatened crops in Argentina, renewing concern that the world's farmers may not be able to grow enough to meet rising demand for bread, pasta and livestock feed. Rice also advanced to a record, while soybeans gained to the highest in 34 years and corn reached a nine-month peak.
Rising prices of food and fuel are stoking inflation and making it more difficult for central bankers to lower interest rates. Kellogg Co., the largest U.S. cereal maker, General Mills Inc., Nissin Food Products Co. and Kikkoman Corp. are among companies that have raised prices.
``We are seeing a broad-based increase in cost pressures,'' Brian Redican, senior economist at Macquarie Group Ltd., said in an interview from Sydney today. ``The increase in soft commodity prices is really the next stage in that process.''
The price of wheat has more than doubled in the past year as adverse weather reduced output from Australia to the U.S. and Canada. Dry, warm weather may hurt yields in Argentina, the fourth-largest exporter, forecaster Meteorlogix LLC said Dec. 14.
``Global supply is really tight at this time,'' Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia, said by phone. ``Saying there's a near-term top in the price is a very dangerous thing to do.''
A smaller Argentine crop may reduce global wheat inventories that the U.S. government says will drop 11 percent by May 31 to 110.1 million metric tons.
Wheat for March delivery, the most-active contract, rose the exchange-imposed daily limit of 30 cents before trading at $10.02 a bushel, up 2.3 percent, in after-hours electronic trading on the Chicago Board of Trade at 6:49 p.m. Sydney time.
U.S. consumer prices rose the most in more than two years last month, reinforcing the Federal Reserve's concern that inflation will erode confidence in the economy. The consumer price index increased 0.8 percent in November, up from 0.3 percent the previous month, the Labor Department said Dec. 14.
Inflation in Europe last month rose at its fastest annual pace since May 2001, increasing 3.1 percent as food costs soared.
``People need to eat and that's part of the fear factor in this environment,'' Brett Cooper, senior client adviser, commodities, with broker MF Global Australia Ltd., said. Prices for wheat may extend gains, he said. ``There's people saying potentially $11 or even $13.''
Higher food prices are forcing some Italians to eat at soup kitchens and threatening unrest in China, where a stampede at a supermarket sale of cooking oil killed three people in November.
Sara Lee Corp. said Dec. 13 it will increase bread prices for a second time since September. Nissin Food will raise prices on its famous Cup O' Noodles for the first time since 1990 from Jan. 1 because of a rise in wheat prices, it said on Sept. 5.
Kikkoman, Japan's biggest maker of soy sauce, said last week it will raise prices for the first time in 18 years because of increasing crude oil and raw material costs.
International buyers are shying away from prices, AWB Ltd., Australia's largest wheat exporter, said in a statement to the Australian Stock Exchange today.
``Buyers are reluctant to lock in significant tonnage at the current prices as their flour margins are negligible,'' Melbourne-based AWB's David Johnson said in the statement. AWB ``expects the international wheat market to remain extremely tight for the first half of 2008.''
India's State Trading Corp. will close bids today to buy 350,000 tons of wheat as India, the world's third-biggest importer of the grain last year, seeks to replenish reserves.
In other markets, soybean futures rose as much as 17.25 cents, or 1.5 percent, to $11.9225 a bushel on the Chicago Board of Trade, the highest since June 1973. The contract for March delivery was at $11.91 at 6:46 p.m. in Sydney.
Soybeans may lead gains among non-energy commodities next year because of shortages of acreage and rising demand for biofuels, Goldman Sachs Group Inc. said in a report Dec. 11. Prices have gained 73 percent this year after U.S. farmers planted the fewest acres in 12 years in favor of corn.
Corn for March delivery rose as much as 5 cents, or 1.1 percent, to $4.4325 a bushel in Chicago, the highest since Feb. 26, when the price climbed to a 10-year peak of $4.5025. The contract stood at $4.425 at 6:54 p.m. in Sydney.
Rough rice for March delivery rose as much as 3.5 percent to a record $13.92 per 100 pounds before trading at $13.77.