Last updated: September 27, 2007 6:17 pm

Record for wheat as crop forecasts shrivel

Wheat prices hit record levels Thursday while oil prices rose above $81 a barrel amid concerns about possible storm disruptions to production in the Gulf of Mexico.

In Chicago, the CBOT December wheat contract rose 18½ cents to $9.35¾ a bushel while the less active March 2008 contract hit $9.42, a record.

The International Grains Council reduced its forecasts for global and Australian wheat production substantially on Thurday. The ICG cut its global wheat production forecast from from 607m tonnes to just 601m tonnes and slashed its estimate for Australian output to 13.5m tons. This is 2m tonnes below the most recent forecast from the Australian government and 9m tonnes lower than last month’s estimate by the ICG.

Wheat stocks for the five largest global exporters are forecast to fall to a 34-year low of 25m tonnes.

“Wheat is on a price reconnaissance mission. What price level will be required to uproot this extraordinary resilient global wheat demand base?” said Greg Wagner, analyst at Horizon Strategies, who highlighted the strength of overseas demand in the weekly export sales reported at 1.56m tonnes, reported Thursday by the US Department of Agriculture.

Strong US weekly export sales of 1.7m tonnes pushed corn prices up with CBOT December corn 7 cents higher at $3.82. “US corn sales are the great barometer of global demand. They are running at twice last year’s levels and will easily reach record levels this year.” said Gavin Maquire of Iowa Grain.

This year’s US corn harvest will be a record but this has not prevented prices rallying since early August due to the strength of global demand. The ICG raised its estimate for US corn production by 7m tonnes to 337m tonnes, an increase of 69m tonnes, or 25.7 per cent, on last year. The massive increase in US production will help global corn production reach a record 766m tonnes this year, a rise of 10 per cent over last year.

Soyabeans soared through the $10 a bushel level with the CBOT November contract up 25 cents to $10.15¾ a bushel after strong weekly US export sales of 745,600 tonnes.

Oil prices moved sharply higher amid concerns about possible storm disruption to production in the Gulf of Mexico.

Nymex November West Texas Intermediate jumped $1.30 to $81.60 a barrel while ICE November Brent gained $1.30 to $78.73 a barrel.

US refineries are moving into maintenance season with refinery utilisation dropping 2.7 percentage points to 86.9 per cent last week. Refinery utilisation stands 5.5 per cent below last year’s levels, raising concerns about potential pressure in product markets as heating oil stocks are 28.7 per cent lower than last year while petrol inventories are 10.2 per cent lower.

Nymex October RBOB unleaded gasoline rose just over 2 cents to $2.0478 a gallon while Nymex October heating oil added 4.4 cents at $2.2265 a gallon.

Lead equalled its record $3,520 a tonne on Thursday amid concerns over tight supplies approaching winter when demand from battery manufacturers rises. Profit-taking subsequently dragged lead 1.2 per cent lower to $3,402.5 a tonne

Copper rose 1.3 per cent to $8,020 a tonne, with fundamental support from threatened strike action in Latin America and signs the London market is again being squeezed higher by a single dominant hedge fund.

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