Wheat tops $9 as stock shrinks

Wheat prices surpassed $9 a bushel for the first time as a drought in Australia cut production, pushing global stockpiles toward a 26-year low.

Australia's wheat crop may be forecast at 18 million metric tons from a previous prediction of 23 million tons in a US report yesterday. In Canada, the world's second-largest wheat exporter, reserves of the grain plunged 29 percent at the end of July from a year earlier, Statistics Canada said.

Rising prices of food, from wheat to milk and pork, are stoking inflation at a time when traders expect the US Federal Reserve to cut interest rates to bail out the housing market and avoid a recession. Wheat prices more than doubled in the past year.

"The market is in a real frenzy," said Tobin Gorey, commodity strategist with Commonwealth Bank of Australia Ltd in Sydney. "It's feeding through to the consumer."

Wheat for December delivery rose as much as 17.25 cents, or 1.9 percent, to $9.0775 a bushel in after-hours electronic trading on the Chicago Board of Trade. The contract was at $9.0475 a bushel at 3:16 pm in Sydney. Prices have surged 80 percent this year.

The advance comes as Egypt, Jordan, Japan and Iraq plan to buy some 460,000 tons of wheat at tenders. The grain is used as livestock feed and to make noodles, cakes and bread, with one bushel enough to make 73 loaves.

Global wheat supplies are expected to decline to 114.8 million tons by the end of the marketing year on May 31, 2008, the US Department of Agriculture said last month. Inventories have fallen as adverse weather cut harvests in Europe, the US, Canada and Australia.

Bloomberg News

(China Daily 09/13/2007 page16)