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Trading of Wheat Futures Heats Up

October 10, 2006|From Bloomberg News

Traders who have lost interest in oil and gold have a new hot commodity to play: wheat.

Wheat futures prices surged Monday in Chicago trading, reaching the daily maximum price increase and hitting a 10-year high, as buyers poured in amid expectations of severe crop losses in Australia.

December futures jumped 30 cents, or 6.5%, to $4.94 a bushel on the Chicago Board of Trade. Trading is halted once the daily limit is reached.

Wheat prices have soared since mid-September as dry weather has hurt crops in the U.S., Australia, India and Europe.

Corn prices also have jumped sharply because of dry conditions in the Midwest. Near-term corn futures in Chicago rose 18.5 cents to $2.895 a bushel Monday.

The Australian government expects farmers there to harvest 16.4 million tons of wheat this growing period, or 35% less than a year ago, because of drought.

Above-normal temperatures with no significant rain in the next seven days will increase stress on Australian wheat, said Joel Burgio, a meteorologist for Meteorlogix in Lexington, Mass.

Global wheat production in the year ending June 2007 will be 588 million metric tons, 0.8% less than forecast in August and down 4.9% from a year earlier, the International Grains Council forecast Sept. 28.

World wheat inventories are forecast to fall to 126.4 million metric tons May 31, the lowest since 1982, from 146.1 million at the end of May this year, according to the U.S. Department of Agriculture.

Global demand will outpace production for the sixth year in the last seven, the agency said.

Prospects for the 2006 world cereal harvest have deteriorated because of exceptionally hot, dry weather this year from Australia to Europe, and dry weather in parts of South Asia is raising some concern about rice production, the Food and Agriculture Organization of the United Nations said Monday in a report.

"The main concern is the declining stocks and whether supplies will be adequate to meet demand without world prices surging to even higher levels," the report said. "This year's anticipated sharp fall in global stocks may lead to a more precarious situation next season should weather problems prevent" higher production, it said.

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