Wheat jumps 1.6% on strong demand, harsh US weather

Tuesday, 8 February 2011 00:38 -     - {{hitsCtrl.values.hits}}

SINGAPORE (Reuters): Chicago wheat futures rose 1.6 percent on Monday, as strong demand led by Egypt’s purchase over the weekend and tenders from Iraq and Bangladesh buoyed the market amid concerns over sub-zero temperatures hurting the US winter crop.

Corn gained 0.2 percent to hit its highest in 30 months, while soybeans rose around half a percent, supported by tightening global supplies and rising demand.

“This is a demand-led rally, Egypt has bought wheat which eases the concern that events in the country are causing logistics problems,” said Brett Cooper, senior manager for markets at FCStone Australia.

“Iraq has tendered for wheat and there is speculation in the market that Iraq will buy more wheat than what it has tendered. There is talk Turkey and Saudi Arabia will issue tenders soon.”

Chicago Board of Trade wheat for March delivery rose 1.6 percent to $8.67 a bushel by 0326 GMT. March soybeans  were up 0.4 percent to $14.38-3/4 a bushel and March corn  gained 0.2 percent to $6.80 a bushel.

Soybeans and wheat touched their highest prices since 2008 last week.

Egypt, the world’s largest wheat importer, bought 170,000 tonnes of soft wheat from the United States, Australia and Argentina. The nation returned to global markets after an absence of nearly a month to buy supplies at a time when an uprising is seeking the ouster of President Hosni Mubarak.

Iraq issued a tender on Sunday to buy 100,000 tonnes of wheat from any origin and Bangladesh’s state grains buyer issued two tenders to import 50,000 tonnes of wheat and 30,000 tonnes of rice.

There was additional support for the wheat market from bitter cold in U.S. Plains threatening the winter crop.

The U.S. heartland has been bracing for more sub zero temperatures this week, which will add stress to the dormant wheat crop and limit grain movement. This will be the second round of frigid temperatures in less than a week for the southern Plains and Midwest.

The state of global crops, pummelled by rains and drought from Australia to Russia, will headline a U.S. government report this week at a time when surging grain prices have stoked global food inflation.

Traders believe the USDA monthly supply-demand report on Wednesday will also restate that stocks of corn and soybeans in the United States – the world’s largest exporter of both commodities as well as wheat – are at their smallest in decades.

Traders will be looking to see if the USDA revises down its crop estimates for Argentina, a top exporter of corn and soy that had been suffering from dry weather until recently.

The grain markets were also underpinned by a weaker dollar, which makes U.S. commodities cheaper for overseas buyers. The dollar index, which measures the strength of the greenback against a basket of currencies, fell 0.2 percent.