Wheat prices dip on supply glut concerns

Wheat prices dip on supply glut concerns

Chicago: Wheat resumed its decline in Chicago on speculation that farmers will increase global planting to capitalize on the highest prices ever, boosting supplies faster than the increases in demand.

India, the world’s second largest wheat consumer after China, said on Tuesday it will boost payments to domestic farmers so as to encourage wheat planting.

Prices have jumped 69% this year in Chicago and set record highs 23 times in the three months ended 28 September.

“Wheat acreage is going to be up significantly," said Jerod Leman, a broker at Wellington Commodities Corp. in Carmel, Indiana. “They’ll be up significantly in Europe."

Wheat futures for December delivery fell 14.5 cents (Rs5.70), or 1.7%, to $8.46 a bushel on the Chicago Board of Trade, after earlier gaining as much as 1.9%.

Wheat has dropped 12% since reaching a record $9.62 on 28 September.

On the Kansas City Board of Trade, wheat touched a record $9.51 on 1 October, and the most-active futures on the Liffe Exchange in Paris reached ?€285 euros a tonne, or $10.93 a bushel—also the highest ever.

India raised the minimum purchase price of the grain by 18% to encourage domestic planting, finance minister P. Chidambaram said on Wednesday in New Delhi. The country bought 1.3 million tonnes (mt) of the grain at record prices since July. The Union government wants farmers to produce 75.5mt of wheat in the year that ends in June, compared with 74.9mt in the year ago period.

US growers also are expected by analysts to plant more wheat. Winter-wheat farmers planted 11% more last October and November after prices reached what was then a 10-year high.

Now that prices are near a record, seeding should increase significantly. The European Commission, the executive body of European Union (EU), on 26 September said it would drop a requirement that 10% of its farmland be set aside for conservation in a bid to boost cereal production and curb prices. The increase in available land next year may add as much as 17mt to the EU’s grain production, the commission estimated.

Wheat also declined as rain helped replenish soil moisture in Argentina, that the US department of agriculture last month said would produce 14mt of the grain.

“Despite dryness cutting Argentina’s fall seedings slightly, warmer temperatures and rains the last two weeks have prompted output talk of 14mt or higher," Jerry Gidel, a market analyst at North American Risk Management Services Inc. in Chicago, said on Tuesday in a report to clients. BLOOMBERG