Friday, August 31, 2007

PARIS: European wheat futures surged on Thursday to all-time highs after an overnight rally on the US market driven by thin global supplies and heavy export demand, traders said.

The Paris-based milling futures were between 7.25 and 9.25 euros higher for 2007/08 with benchmark November up eight euros, or more than three percent, at 252.5 euros after hitting 253.5 euros in earlier trade.

That was the highest price paid for a tonne of wheat on Euronext wheat futures since their launch in 1998. The November contract has risen more than 90 percent in the past five months.

“We have entered a totally irrational period,” a European grain exporter said. “The problem of supply and demand is such that prices are not high enough to sufficiently ration demand.” All Euronext futures contracts, including those for the 2008/09 season, followed the move and set new contract highs. The surge followed a similar rise on the Chicago Board of Trade wheat futures which also set new all-time peaks in overnight trade amid strong demand and tight supply.

Prices also rose sharply in London with November feed wheat futures peaking at 172 pounds a tonne, a record for the front month, up 3.5 percent on the day. Prices in Britain have doubled since early April.

Low stocks, high demand: The US Department of Agriculture has projected that world wheat stocks will drop to 114.8 million tonnes by the end of the 2007/08 marketing year, a 26-year low, following poor weather earlier this year in parts of Europe and the United States.

Most active December wheat rose in electronic-trading by 21 cents to $7.79-1/2 per bushel after hitting a new historic high of $7.80 per bushel in earlier trade. “Many importing countries were not well covered and some are rushing in before Ramadan mid-September,” another exporter said. The possibility that India could pay up to $400 per tonne (cost and freight included) at its wheat tender — which received bids for more than half a million tonnes — was seen as an illustration of global tightness.

Compared with initial forecasts of a near-record crop of up to 26 million tonnes, dry weather has shrunk expected output to 20-22 million tonnes, according to industry forecasts. reuters

http://www.dailytimes.com.pk/default.asp?page=2007%5C08%5C31%5Cstory_31-8-2007_pg5_26