By Nathalie Voit
The price of wheat reached record highs on Nov. 1 as food inflation fears prompted high demand from top importers worried about decreasing reserves in the near future.
According to data from CME Group, which merged with the Chicago Board of Trade (CBOT), Chicago wheat futures topped $8 a bushel, hitting an 8-1/2-year high on Monday. Meanwhile, the Minneapolis Grain Exchange (MGEX) spring wheat contract surged to its highest levels since June of 2011 on Oct. 26 when it traded at $10.47 a bushel, Reuters reported.
The most popular variety, Chicago’s soft red winter wheat, climbed to US$7.9575 on Monday, its priciest since February 2013. Chicago’s hard red winter wheat also broke a new record when it rose to US$8.0475, a 7-1/2-year high. Wheat is now on its longest streak of monthly gains since 2007, according to Bloomberg.
Rising demand follows poor harvests due to inclement weather in key wheat-producing regions of the country. Dry weather last month coupled more recently with heavy rain and storms in critical wheat-growing Midwest states like Kansas contributed to a five-year low overall grain stockpile forecast.
In conjunction with inflation-related price gains on other basic inputs like fertilizers and ongoing supply-chain disruptions, adverse weather has only accelerated worries about food insecurity and prompted hoarding from top importers.
“Granted that it is early in the year, but there is a lot of wheat that is not very good,” admitted Mark Schultz, chief analyst at Northstar Commodity.
Major importing nations from Egypt to Saudi Arabia are aggressively purchasing wheat by the bulk despite already having enough reserves to meet their population’s demand. According to Bloomberg, Saudi Arabia just closed a deal locking in 1.3 million tons of wheat over the weekend, which turned out to be over double the amount originally expected. Meanwhile, Egypt purchased 180,000 tons of Russian wheat on Monday, less than a week after its largest wheat purchase of the season. Other countries are expected to follow suit, despite the rising costs.
“Speculators keep talking about inflation and are buying commodities for an inflation trade,” said Vice President for Price Futures Group in Chicago Jack Scoville in a note.
Corn prices also rose on Monday for a fifth straight day of gains, closing at US$5.7875 in Chicago for its priciest level since July 2, reported Bloomberg. Harvest delays last week contributed to the spike.
“It is plenty wet… with rains of 1 to 2 inches falling over much of the harvest area, and farmers won’t be able to get back in the fields,” Global Head of Grain Futures at ED&F Man Capital Charlie Sernatinger said.
