Demand expectations send wheat to two-year high

Wheat prices set two-year highs in both Chicago and Paris on Wednesday, and rose in London to within an ace of record highs, as talk of Algeria accelerating purchases heightened talk of stockpiling amongst major importers.

Chicago wheat for March touched $8.48 ¾ a bushel, the highest level for a spot contract since August 2008.

Paris wheat for the same month stood at the E266.00 a tonne in lunchtime deals, the best price for a near-term lot since March 2008, while London wheat edged 1.0% higher to £203.00 a tonne, £0.30 shy of the all-time high set three weeks ago.

The rises came amid a rash of further speculation of orders from Middle Eastern and North African nations unsettled by unrest in countries such as Algeria, Egypt and Tunisia this month blamed in part on rising food prices.

Algeria, the world's fourth-ranked wheat importer, was reported to be enacting plans to accelerate purchases, after issuing its third tender for the grain this month. Traders are expecting news on an Iraqi tender, and potentially of a quest by Saudi Arabia for grain too.

Tight supplies

While Egypt, the top importer, said it was not altering its purchasing strategy, and that it had enough wheat supplies for six months, that was "not necessarily how the market was trading it", Jonathan Lane, trading manager at UK merchant Gleadell, said.

"You wouldn't want to be in Egypt's position," he told Agrimoney.com.

Indeed, wheat supplies were harder to secure than might first appear from apparently robust global stocks estimates, with the grain fighting for port space with corn and soybeans in the US, and in Australia, thanks to the unusually eastern-weighted crop, being handled by facilities not fitted for such large volumes.

"At the moment, the only place you can buy and physically ship [milling] wheat out is France," the top European producer and exporter of the grain where waning stocks have already provoked concerns about the level of shipments.

UK exports, meanwhile, have been running at twice last season's levels, according to customs data.

Imports from Australia?

The drain on European Union supplies has prompted talk of the region's own buyers turning as far as Australia for replacement supplies before the harvest replenishes silos, with the European Commission yet to decide on a E12-a-tonne levy, and quota levels, on imports.

Jaime Nolan at FC Stone, flagging Spanish interest in Australian feed wheat, noted that the grain would cost some $305-10 a tonne to import, including freight.

Mr Lane noted that, with the backlog of Australian orders, it may take until April or May to discover the truth in speculation of purchases from the country.

(Source: http://www.agrimoney.com/news/demand-expectations-send-wheat--to-two-year-high--2749.html)