Investors Hungry For Wheat
Investors Hungry For Wheat
LONDON -
If you think the United States doesn’t have an inflation problem, take a look at the commodities markets. On Monday, wheat futures in Chicago reached record highs, as commodity exchanges hiked their trading limits to allow upward price pressures more leeway.
The price of wheat in Chicago for March delivery rose to a record high of $11.53, during early trading on Monday, before dropping to $10.92, down a penny from Friday’s close. Still, the grain is up from $8.85 at the end of last year and $5.01 at the close of 2006.
High-protein spring wheat for March delivery rose 60 cents, to $16.13, breaking a record in Minneapolis.
The initial flurry of activity was partly due to new rules instated on Monday, which increased the day-to-day price band allowed for futures settlements in Chicago, Kansas and Minneapolis to 60 cents from 30 cents.
This is the first time in eight years that the exchanges have raised limits on wheat, and is a sign that soft commodities are seen as a safe bet while equities continue to plummet around the world. Bad weather and poor crops across Asia and Australia have placed added pressure on American inventories, which according to the United States Department of Agriculture are heading for 50-year lows.
“The new limits get us to the point that the markets allow for a clear,” said Richard Feltes, senior vice president of commodity research at MF Global. “They do not solve the underlying issues which have brought us here.”
Feltes told Forbes.com that the U.S. had sold almost all of its available wheat, with the pace of buying from countries such as Japan and South Korea showing no signs of slowing down. He said that from the middle of January, it became clear that the wheat crop had been oversold–the result was an unprecedented “hyper mode” for traders, which led to Monday’s limit increase.
“This price action is all about trying to extract the remaining wheat supplies from farmers, which typically hold them very tightly,” he said.
Wheat is not the only commodity that is hitting all-time highs. Precious metals like gold and platinum are enjoying booma, while crude oil is still more than $90 per barrel as supply concerns offset fears of a worldwide economic downturn. Expect the hunger for wheat specifically to continue, despite retailers’ difficulties in passing on costs to consumers: British food companies Premier Foods (other-otc: PRRFF - news - people ) and Associated British Foods (other-otc: ASBFY - news - people ) are in the spotlight as they struggle with higher wheat prices. (See “Europe Hit By Rising Cost Of Wheat”)
The Associated Press contributed to this article.
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