Wheat Rises in Chicago on Supply Concerns; Corn, Soybeans Fall
By Feiwen Rong
Dec. 18 (Bloomberg) -- Wheat futures gained in Chicago on expectations demand is increasing at a time of shrinking global stockpiles. Corn and soybeans declined as recent advances may have been overdone.
U.S. consumer prices rose the most in two years last month, while inflation was 6.9 percent in China and 3.1 percent in Europe. Inflation is accelerating as oil and other energy prices reached records in November, spurring investors to buy commodities as a store of value.
``The global backdrop of inflationary pressure is supportive for agricultural products as we head into 2008,'' Nie Ben, manager at Liaoning Cifco Futures Co., said by phone from Dalian in northeastern China today.
Wheat for March delivery, which reached a record $10.095 a bushel yesterday before settling at $9.66, today rose as much as 1.1 percent to $9.77 in after-hours electronic trading on the Chicago Board of Trade. They traded little changed at $9.6575 as of 12:17 p.m. local time in London. Global wheat inventories may drop 11 percent by May 31 to 110.1 million metric tons, according to the U.S. Department of Agriculture.
The sell-off in Chicago yesterday was partly stoked by a rally in the dollar to a seven-week high against the euro, said Nie.
``A strengthening U.S. dollar hurts all commodities including base metals and agricultural products,'' he said. ``Compared with base metals, the agricultural complex's performance was much more resilient.''
Weather Nerves
The wheat market has become a ``weather market'' after two years of adverse conditions cut global crops and boosted prices, Emmanuel Jayet, an agricultural commodities and biofuels analyst at BNP Paribas SA in Paris, said in an interview today. ``The market is already quite nervous about the weather and it's only December; there is going to be a lot of volatility next year.''
Milling wheat traded in Paris slid 3.75 euros, or 1.4 percent, to 263.50 euros ($379) a ton as of 1:18 p.m. local time.
Corn reached a nine-month high yesterday at $4.4325 a bushel, while soybeans extended a rally to the highest since 1973 on speculation that U.S. demand for fuel made from grain and oilseeds will surge. The Senate passed a bill Dec. 13 that may boost use of alternative fuels such as ethanol and biodiesel.
The most-actively traded ethanol contract in Chicago gained 1 percent yesterday. ``Further appreciation in ethanol is bullish for the corn market,'' Dan Cekander, analyst at Fimat USA, said in a report yesterday.
Corn, Soybeans
Corn for March delivery fell 0.8 percent to $4.3525 a bushel at 12:19 p.m. London time today. Soybeans for March delivery dropped 0.1 percent to $11.745 a bushel at the same time. The 14-day relative strength index for corn and soybeans has been above 70 since Dec. 7, signaling prices may be poised to decline.
In China, agricultural commodities traded in Dalian and Zhengzhou fell after the government said it would eliminate export tax rebates on a range of food commodities as part of measures to secure domestic supplies and control food prices.
Soybeans for September delivery on the Dalian Commodity Exchange, fell by 80 yuan, or 1.8 percent, to close at 4,446 yuan ($602) a ton. The most-active contract has gained 64 percent this year. Corn for May delivery fell by 24 yuan, or 1.4 percent, to 1,731 yuan a ton.
``There's also seasonal pressure because it's harvest time now in China and investors expect to see farmers step up selling to get cash before the New Year,'' Nie of Liaoning Cifco said.
To contact the reporter for this story: Feiwen Rong in Singapore at
[email protected]
Last Updated: December 18, 2007 07:49 EST
