Wheat Price Rises to Record $9 a Bushel on Global Crop Concerns
Sept. 12 Wheat prices surpassed $9 a bushel for the first time as a drought in Australia cut production, pushing global stockpiles toward a 26-year low.
Australia's wheat crop may be forecast at 18 million metric tons from a previous prediction of 23 million tons in a U.S. report today. In Canada, the world's second-largest wheat exporter, reserves of the grain plunged 29 percent at the end of July from a year earlier, Statistics Canada said yesterday.
Rising prices of food, from wheat to milk and pork, are stoking inflation at a time when traders expect the U.S. Federal Reserve to cut interest rates to bail out the housing market and avoid a recession. Wheat prices more than doubled in the past year, increasing costs at Sara Lee Corp. and Premier Foods Plc.
``The market is in a real frenzy,'' said Tobin Gorey, commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. ``It's feeding through to the consumer.''
Wheat for December delivery rose as much as 17.25 cents, or 1.9 percent, to $9.0775 a bushel in after-hours electronic trading on the Chicago Board of Trade. The contract was at $9.0475 a bushel at 3:16 p.m. in Sydney. Prices have surged 80 percent this year.
The advance comes as Egypt, Jordan, Japan and Iraq plan to buy some 460,000 tons of wheat at tenders. The grain is used as livestock feed and to make noodles, cakes and bread, with one bushel enough to make 73 loaves.
Australian Crisis
Australian farmers face an unprecedented crisis within a month unless spring rains arrive, the Melbourne-based Age reported today, citing Agriculture Minister Peter McGauran.
The wheat harvest in Australia, expected to be the world's third-largest shipper of the grain this year, could be as low as 15 million tons, Rabobank Group has said. The government's commodity forecaster, the Australian Bureau of Agricultural and Resource Economics, estimated the crop in June at 22.5 million tons, more than double last year's harvest. Its next update is scheduled for Sept. 18.
Barley prices in Winnipeg, Canada, gained 41 percent in the past year on increased demand for animal feed and for brewing beer. Canada is one of the world's biggest barley producers. Corn has gained almost 50 percent in the same period, as demand for grain-based ethanol surged.
Global wheat supplies are expected to decline to 114.8 million tons by the end of the marketing year on May 31, 2008, the U.S. Department of Agriculture said last month. Inventories have fallen as adverse weather cut harvests in Europe, the U.S., Canada and Australia. The U.S. is the world's largest wheat exporter.
Japan, Iraq Buying
Prices are rising as Egypt, the world's second-biggest wheat importer, plans to buy at least 55,000 tons of hard wheat in a tender today for delivery in October. Japan seeks to buy 155,000 tons of wheat tomorrow at a tender, comprising 95,000 tons from the U.S., 20,000 from Canada and 40,000 from Australia.
The Grain Board of Iraq plans to buy at least 50,000 tons of wheat from any origin at a tender this month. Jordan is seeking to buy at least 200,000 tons of wheat at international tenders for delivery by Dec. 1.
The U.S. Department of Agriculture is scheduled to update its crop estimates at 8:30 a.m. in Washington.
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