Wheat Futures Rise to Three-Week High on Speculation Supplies Will Tighten

Wheat futures climbed to a three- week high on speculation that the U.S. Department of Agriculture may pare its estimate of global inventories for a fourth time, signaling tighter supply. 

The December-delivery contract rose as much as 1 percent to $7.485 a bushel in Chicago, the highest price since Aug. 13, according to Bloomberg data. It traded at $7.455 at 2:14 p.m. Singapore time. 

The USDA will forecast wheat stockpiles before the 2011 harvest at 171.09 million metric tons, compared with 174.76 million tons last month, according to the average estimate of 13 analysts surveyed by Bloomberg. The USDA cut its estimates every month since May, when it predicted stockpiles at 198 million. 

“The market has been bullish on hopes that the world wheat market will remain tight,” Chung Yang Ker, an analyst at Phillip Futures Pte. in Singapore, said by phone today. “We have to wait until the next harvest to see whether the situation will get better.” 

Wheat futures have surged 75 percent since trading at this year’s low of $4.255 a bushel on June 9. The advance in wheat price “is a concern in itself,” Abdolreza Abbassian, senior grains economist at the United Nations’s Food & Agriculture Organization in Rome, said in an interview on “The Pulse” yesterday. “It is not something we consider at this stage to be of a global-crisis status,” he said. 

Port Bottleneck

The Baltic Dry Index, a measure of commodity-shipping costs, yesterday rose 0.2 percent to 2,881 points, the highest level in almost 12 weeks, on demand for panamax vessels to transport cereals after Russia extended a ban on grain exports through next year. 

While the U.S., the world’s largest wheat shipper, may be able to meet rising demand from importers after the Russian ban, the country may not have the port facilities needed to move cargoes fast enough, Franciscus Welirang, chairman of the Flour Mills Association in Indonesia, said in an interview yesterday. 

Limited port infrastructure in the U.S. has delayed deliveries and consumers will have to get used to a “new price level,” as importers pay more for the grain amid competition for American supplies, Welirang said. 

Welirang’s comment adds to evidence that tightness in global wheat supply is flowing into retail flour prices, and signals that wheat prices will keep rising, Phillip Futures’s Ker said. “I totally agree with him that consumers must get used to higher prices,” he said. 

The port congestion cited by Welirang “has further exacerbated the situation,” Peter McGuire, managing director at CWA Global Markets Pty. said, as he forecast wheat prices may trade at $8 a bushel this month. “From where I’m sitting, it looks more bullish than bearish.”

Food Price Gains

Higher wheat prices helped push the FAO’s global Food Price Index to 176 last month, the highest level since September 2008. 

Importers coming into the market to replace supply originally meant to be sourced from Russia and other parts of the Black Sea will have a difficult time buying the commodity from the U.S., Eric Bailon, president at Manila-based Paritas Trading Corp., who said he’s been alerted on Welirang’s comment on port congestion by an exporter from Romania. 

“Elevators in the U.S. are full,” Bailon said, after checking with wheat export contacts in that nation. Paritas Trading supplies imported wheat, rice and corn into the Philippines. “The situation is problematic for importers who are placing orders just now.” 

Corn for December delivery was little changed at $4.6475 a bushel in Chicago.

The USDA may estimate global inventories of corn at 135 million tons, the lowest level since 2008, according to the average estimate of 13 analysts surveyed by Bloomberg. The department, which forecast inventories at 139.2 million tons last month, has been paring its estimate each month since May. 

The USDA will release its next estimate on world agricultural supply and demand on Sept. 10 at 8:30 a.m. in Washington. Soybeans for November delivery gained 0.4 percent to $10.39 a bushel.Source: Bloomberg