Singapore: Wheat futures in Chicago breached $11 (Rs434.5) a bushel for the first time, rising by the exchange-imposed daily limit for a sixth day after the US forecast its lowest inventories in 60 years.
Stockpiles in the world’s biggest exporter will drop to 272 million bushels at the end of May, 6.8% less than expected a month ago and down 40% from a year earlier, the US agriculture department said in a report on 8 February. Inventories will be the lowest since 1948 when farmers grew less and shipped supplies overseas to help countries to rebuild after World War II.
This month’s unprecedented rally in wheat may raise costs for companies, including Kellogg NA Co. and General Mills Inc., the largest US cereal makers. Higher food prices are stoking inflation, increasing social tension in developing countries, and making it difficult for central bankers to spur economic growth by cutting interest rates.
“There isn’t enough spring wheat to meet ongoing shipment demands of Asian customers,” said Simon Roberts, head of agricultural commodities at Australia and New Zealand Banking Group Ltd, from Sydney on Monday.
Wheat for March delivery rose by as much as 60 cents, or 5.5%, to a record $11.53 a bushel in after-hours electronic trading on the Chicago Board of Trade. Prices gained 16% last week and more than doubled in the past year. The exchange doubled its daily limit from Monday after prices gained the previous maximum of 30 cents for five straight days. The rally in wheat accelerated in the past year after weather damaged crops in some of the world’s biggest producers, including the US, Canada and Australia. Buyers also increased purchases on speculation farmers wouldn’t harvest enough to meet needs and to curb rising food costs.
World inventories of all wheat are expected to fall to 109.7 million tonnes by the end of the marketing year on 31 May—down 1.1% from the government’s January estimate and the lowest since 1978, the US agriculture department said. Exporters of the grain are expected to ship 3.9% less wheat in the year because more countries are retaining domestic supplies to ensure food prices stay low. That’s stepped up demand for US exports.
Last week’s gains in wheat were attributed to shortages of high-protein spring varieties used for bread and pasta. These types, traded in Minneapolis, are grown in the northern Great Plains, including North Dakota and Minnesota, and in Canada.
On the Minneapolis Grain Exchange, wheat for March delivery rose by the exchange limit of 60 cents to a record $16.13 a bushel. The price has more than tripled in the past year.
Harvest of spring wheat was limited after drought hurt plants last year in the northern plains and in Canada. Soft, red winter wheat is produced mostly in eastern Midwest and trades in Chicago.