US wheat prices soar to record

US wheat prices soar to record
By Chris Flood
Copyright The Financial Times Limited 2007
Published: September 12 2007 22:29 | Last updated: September 12 2007 22:29


US wheat prices soared to record levels after the US Department of Agriculture said global wheat stocks would shrink to their lowest levels for 30 years.

The Chicago Board of Trade December wheat contract reached a record $9.11¼ a bushel before easing back to trade 7 cents higher at $8.97½ a bushel.

Wheat harvests of big producers have come under severe stress this year and the USDA cut its forecast for global wheat production in the year to May 2008 to 606.24m tonnes from last month’s estimate of 610.4m tonnes. Weaker production and strong overseas demand are expected to reduce global stockpiles to 112.36 tonnes by May 2008 from last month’s estimate of 114.78m tonnes.

Greg Wagner, analyst at Horizon AG Strategies, said stocks as a proportion of daily usage were expected to be the lowest for 50 years and record prices would force a dramatic reallocation of acreage devoted to wheat production.

But US farmers will enjoy a record corn harvest of 13.3bn bushels this year as heavy rainfall in August provided much-needed moisture for the crop. Corn yields are expected to be the second highest on record at 155.8 bushels an acre, from last month’s estimate of 152.8 bushels an acre, compared with the high of 160.4 bushels an acre achieved in 2004.

Corn stocks at the end of August 2008 were expected to be about 1.675bn bushels, compared with last month’s estimate of 1.516bn bushels.

Ethanol makers are expected to use 100m fewer bushels of corn than previously expected, with demand forecast at 3.3bn bushels over the next 12 months.

CBOT December corn rose 15 cents to $3.56¼ a bushel. The drive to plant more corn is having an impact on US soyabean production, which is expected to fall to 2.619bn bushels from last year’s record 3.188bn bushels.

Gavin Maguire of Iowa Grain said the rapid decline in soyabean inventories meant the stage was set for a serious battle between soyabeans and corn for acreage next year.

The amount of land that US farmers devote to soyabean production is projected to fall from 75.5m acres in 2006-07 to 64.1m acres in 2007-08. Soyabean yields are projected to slip to 41.4 bushels an acre, down from an estimated 42.7m bushels an acre in 2006-07.

“The decline in soyabean yields reflects the fact that the best ground is going to corn production,” said Mr Wagner of Horizon. “This could prove to be a chronic problem for the soyabean market going forward.”

Soyabean prices rose, with the CBOT November contract up 28 cents to $9.48½ a bushel.