Posted on 02/26/2008 9:03:28 AM PST by bjs1779
In the wheat price surge on Monday this week, the leading wheat contract in Minneapolis, US, rose by more than the entire worth of the contract just months ago.
Prices rallied by $5.75 a bushel, or by nearly 30pc, at one point from Friday’s close.
Eight months ago on June 19, the lead Minneapolis wheat contract settled at over $US5.00 a bushel.
Panic over commodity shortages continues to emerge as the dominant factor in the global markets, with both end user and speculative buyers of corn, soybean, cotton, rice and a host of other commodities taking note of what’s happening in the wheat pit.
While US has made improvements to increase crop production efficiency in recent years, the world hasn’t really put sufficient investment into production agriculture for several decades.
The net result has been declining stocks at the same time that expanding global wealth has demanded more raw commodities.
The net result on Monday was new all-time record high prices for corn, soybeans and wheat on the same day.
Sentiment in the marketplace is changing from, 'buying just-in-time' to one of, 'buy what you need at any price' and then to 'buy even more to restock the shelves'.
In other words, there’s evidence to suggest that we’re beginning to enter the hoarding phase of the inflationary cycle.
Along that line, commodity traders are attempting to hoard land on which to produce their respective commodities by bidding up prices in an acres war.
The market should remain in this phase until supply reaches surplus levels and everything collapses, similar to what was seen in the late-90s.
However, there’s little evidence at this point that the market will begin that collapse anytime soon, especially with the US growing season still weeks away and weather being as large as it’s ever been this year.
That doesn’t mean that there aren’t risks and that there won’t be large price swings similar to what have been seen in the wheat pits over the past six months.
But it does mean that end users and speculators alike, remain anxious to buy those price breaks when they occur.
Corn was largely a follower on Monday, reacting to sharply higher wheat and soybean prices.
Demand remains good, but most of the focus was with the above two commodities that are facing immediate supply shortfalls.
The real strength in corn is in the fear that other crops will rob too many acres from the feed grain, rendering it short in supply in the next marketing year that begins September 1.
Solid demand for soyoil and soybeans, especially from China, continues to fuel buying interest in the oilseed complex.
China is said to be buying both to fight food inflation and to build inventories ahead of this year’s Olympics.
Supply fears created by adverse weather in China’s rapeseed belt earlier this month, simply reinforced the sentiment.
The outright panic seen in the wheat pits today sent additional tremors through the oilseed market, where traders couldn’t help wonder if a similar scenario could be in its future.
The panic buying came on the day that Minneapolis lifted all daily limits on the March contract, hoping to ensure that the contract would enter into its delivery period in an orderly fashion on Friday.
Nobody wanted to be a seller in this environment, causing the lead contract to quickly surge above $23/bus.
The Minneapolis March contract eventually reached $25 per bushel, before correcting lower to $24 at the close, up $4.75 on the day.
The deferred Minneapolis contracts locked the expanded 90c daily trading limit higher for much of the day.
Limits on those contracts will expand to $1.35 tomorrow, beginning with electronic trade this evening (US central time).
Chicago and Kansas City contracts locked the 60c daily trading limit higher today, with those limits expected to increase to 90c.
Unbelievable.
Let’s plant more corn so we can burn our food and reduce our available land for wheat and other commodity production!! Good old ethanol. But I’m sure ADM’s stock is up!
The Law of Unintended Consequences rears its heartless self again......
Yep, ADM’s stock is closing in on its 52 week high.
Good time to be a farmer right now. Hopefully we can get rid of the bio-fuel subsidies scam soon.
It’s time to go after “Big Food.”
No, it’s time to shut down the ethanol scam.
Ah the joys of “Food for fuel”.
I imagine more wheat will be grown, the price comes down, etc. However - I imagine that there are all sorts of subsidies, tax breaks , etc. for corn/ethanol production so perhaps that offsets going back to wheat? It seems a bit goofy to me to take a year’s worth of corn for one person and use it to make one tank of gasoline if that often quoted statistic is true.
I wonder if all the wheat we sell to China is contaminated with lead? (Fair trade and all)
There are several articles out there re global food grain shortages:
http://www.allaboutfeed.net/news/id102-39808/india_minister_fears_grain_shortage.html
From the second link:
The leader of Britain’s largest opposition party has told British farmers that the current global shortage of grains is partly being caused by Chinese and Indians eating more meat than before.
David Cameron of the Conservative Party told farmers that Britain could feel the impact of a global ‘food crunch’ because of changes in people’s diets, climate change and the search for bio fuels.
People in China and India were eating more meat, which meant farmers were switching from producing grains to rearing livestock in order to meet surging demand, Cameron told the National Farmers’ Union’s centenary conference in London.
At the same time, he said, growing demand for bio fuels was adding pressure on global grain stocks because they required arable land for production, he said.
‘We face the potential prospect that the abundance of food that we all take for granted will come to a crashing end,’ he said.
Thanks, President Bush, for giving up on ANWR and nuclear power and going with ethanol.
Reason why I stocked up on flour two weeks ago. (Now if I could just find a decent place to store it)
No, it’s miracle wheat. Someone call Charles Taze Russell.
What is a good futures website with close to real time prices?
“ADM, Supermarket to the World” - lol.
Try CBOT futures,updates every 10 minutes.
As we all know from the Chinese dogfood scare wheat protein is nearly indistinguishble from melamine ~ which would probably mean that if you have a choice between buying plastic stocks (melamine) at an inflated price due to runaway oil prices, then you'll turn to other sources, e.g. wheat gluten ~ at $24 per bushel.
We need someone in the plastics industry to tell us what the precise outlines of this linkage is ~
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