Wheat, soyabeans and rice charged to record levels on Wednesday, supported by tightening fundamentals and fresh investor inflows.
High protein spring wheat traded at the Minneapolis Grain Exchange has risen by its 30 cents trading limit for each of the past six sessions with the March contract hitting a record $14.93 a bushel yesterday. The Minneapolis exchange plans to raise the daily trading limit to 40 cents next week.
Traders said activity in options contracts suggested an implied price of about $1.50 above the March futures contract.
Minneapolis spring wheat prices have jumped by 46 per cent so far this year, boosted by low inventories and concerns that high corn and soyabean prices will encourage farmers to switch from wheat to other crops.
In Chicago, CBOT March wheat also rose by its 30 cents daily trading limit to a record $10.33 a bushel, pushing above its previous peak of $10.09½ a bushel set in December. Wheat prices in Kansas also rose by their 30 cents daily trading limit to $10.80¼ a bushel.
Importing countries are afraid that any further disappointments in global wheat harvests could push prices even higher and are scrambling to secure supplies.
Strength in US wheat prices spilled over into Europe with Liffe March wheat up 4.4 per cent to €272 a tonne.
US corn and soyabeanprices moved higher as these crops will face intense competition from wheat for land in 2008. CBOT March corn added 17¾ cents at $5.27 a bushel while CBOT March soyabeans jumped by their 50 cents daily trading limit to a record $13.73 a bushel. Traders are watching developments in South America as Brazil’s soyabean harvest in the north is being delayed by rain.
Oil prices fell after the latest US weekly inventories data showed a huge rise of 7m barrels in crude stocks, well above the consensus forecast for an increase of 2.6m barrels.
Nymex March West Texas Intermediate dropped $1 to $87.41 a barrel while ICE March Brent fell 58 cents to $88.24 a barrel.
US refineries reduced demand for a fourth week with refinery utilisation down 0.7 percentage points to 84.3 per cent.
Traders were anticipating further evidence of demand softening as the US economy appears to be sliding towards a recession but expressed surprise at the breadth of weakness in the report.
“Inventories were up across the board [and] implied demand looked terrible”, said Tim Evans of Citigroup.
A real surprise was a rise of 0.1m barrels in distillate stocks (including heating oil) which had been expected to continue their seasonal decline with a fall of 1.9m barrels. Nymex March heating oil fell 2.2 cents to $2.4242 a gallon
High prices are having an impact on US petrol demand with gasoline stocks up by 3.6m barrels, well above the consensus forecast for a 2m barrel increase. Nymex March RBOB unleaded gasoline lost 2.1 cents at $2.2433 a gallon.
Edward Meir of MF Global expects further weakness for crude oil prices. “WTI is on-track to test key support at the $85.82 level, which if broken, would constitute a major break in the longer-term upchannel going back to January of 2007,” said Mr Meir: “Keep in mind that WTI prices are still about $10 higher than where we were only four months ago when the global macro situation was noticeably brighter and crude’s fundamentals significantly tighter.”
Platinum rose 2.8 per cent to a record $1,819 a troy ounce amid concerns about South African supplies after the government appealed to mining companies for help in cutting electricity consumption. The platinum market is extremely tight and available stocks could be as low as 1m ounces.
Gold rallied above the $900 level, rising 2 per cent to $904.20 a troy ounce.