The following article is from the Wall Street Journal:
By TOM POLANSEK
Wheat prices soared to the highest point in more than two years on a combination of persistent dry conditions in the U.S. plains states and the disclosure of recent purchases by Egypt, the world’s largest wheat buyer.
The price of the soft, red winter wheat futures contract for March delivery rose 18 cents, or 2.3{4d08edaf359bc2115b18a651716ebd427a137946ddca2143fa23b3ea721061e4}, to $7.9825 a bushel on the Chicago Board of Trade.
It is the highest closing price since August 2008, when grain prices were just beginning to decline following a spike brought on by food shortages.
The last time wheat ended at a two-year high was Aug. 5, the day before Russia said it would institute a ban on grain exports in the wake of a devastating drought.
Wheat prices on Tuesday fell short of the Aug. 6 intraday peak of $8.41 a bushel.
Russia was supposed to be a big exporter in 2010. Its reversal of fortune because of record heat and raging wildfires set the stage for a decline in global stockpiles.
According to U.S. Department of Agriculture estimates, there will be 176.7 million metric tons of stored wheat at the end of May 2011, 10{4d08edaf359bc2115b18a651716ebd427a137946ddca2143fa23b3ea721061e4} less than a year earlier.
A metric ton equals 2,204.62 pounds.
“We’re still looking at some general concerns about supplies,” said Rich Nelson, director of research at Allendale, an Illinois commodity brokerage.
The market’s latest preoccupation is weather in western Plains states such as Kansas and Oklahoma. This area accounts for much of the U.S.’s crop of hard, red winter wheat—a variety typically milled for flour that is used commonly for breads—that was sown in the autumn and will be harvested in early summer.
“Moisture will need to increase by spring to prevent significant stress once the crop breaks dormancy,” said Donald Keeney, senior agricultural meteorologist for MDA EarthSat Weather, a private forecaster.
Winter wheat stops growing once temperatures drop to protect itself from the cold. Development restarts when warm weather returns in the spring.
Traders are on edge about production threats after several exporting nations were plagued by weather problems.
Aside from the drought in Russia, torrential rains damaged crops in Canada and eastern Australia this year. Tuesday, prices breached $8 a bushel.
Soybeans and corn also have risen in the past several months.
Because Egypt is the world’s largest importer of wheat, it has developed a reputation as a savvy buyer. That is why prices jumped on news that the state commodity procurement agency held a tender and ended up agreeing to purchase 60,000 tons of U.S. soft, red winter wheat and 120,000 tons of Argentine wheat.
Some see the move as a sign that prices could move higher in the coming weeks.
Other countries, including Iraq and Turkey, also are seeking wheat, traders said.
The Middle East wheat belt is another region that has struggled with dryness, raising concerns that countries such as Iraq, Syria and Iran—already big wheat buyers—may become even more reliant on imports.
Posted by Haylie Shipp
