Thread: 'Panic' wheat buying across the US

'Panic' wheat buying across the US

By Arlan Suderman, Farm Progress grain markets analyst
Tuesday, 26 February 2008

In the wheat price surge on Monday this week, the leading wheat contract in Minneapolis, US, rose by more than the entire worth of the contract just months ago.

Prices rallied by $5.75 a bushel, or by nearly 30pc, at one point from Friday’s close.

Eight months ago on June 19, the lead Minneapolis wheat contract settled at over $US5.00 a bushel.

Panic over commodity shortages continues to emerge as the dominant factor in the global markets, with both end user and speculative buyers of corn, soybean, cotton, rice and a host of other commodities taking note of what’s happening in the wheat pit.

While US has made improvements to increase crop production efficiency in recent years, the world hasn’t really put sufficient investment into production agriculture for several decades.

The net result has been declining stocks at the same time that expanding global wealth has demanded more raw commodities.

The net result on Monday was new all-time record high prices for corn, soybeans and wheat on the same day.

Sentiment in the marketplace is changing from, 'buying just-in-time' to one of, 'buy what you need at any price' and then to 'buy even more to restock the shelves'.

In other words, there’s evidence to suggest that we’re beginning to enter the hoarding phase of the inflationary cycle.

Along that line, commodity traders are attempting to hoard land on which to produce their respective commodities by bidding up prices in an acres war.

The market should remain in this phase until supply reaches surplus levels and everything collapses, similar to what was seen in the late-90s.

However, there’s little evidence at this point that the market will begin that collapse anytime soon, especially with the US growing season still weeks away and weather being as large as it’s ever been this year.

That doesn’t mean that there aren’t risks and that there won’t be large price swings similar to what have been seen in the wheat pits over the past six months.

But it does mean that end users and speculators alike, remain anxious to buy those price breaks when they occur.

Corn was largely a follower on Monday, reacting to sharply higher wheat and soybean prices.

Demand remains good, but most of the focus was with the above two commodities that are facing immediate supply shortfalls.

The real strength in corn is in the fear that other crops will rob too many acres from the feed grain, rendering it short in supply in the next marketing year that begins September 1.

Solid demand for soyoil and soybeans, especially from China, continues to fuel buying interest in the oilseed complex.

China is said to be buying both to fight food inflation and to build inventories ahead of this year’s Olympics.

Supply fears created by adverse weather in China’s rapeseed belt earlier this month, simply reinforced the sentiment.

The outright panic seen in the wheat pits today sent additional tremors through the oilseed market, where traders couldn’t help wonder if a similar scenario could be in its future.

The panic buying came on the day that Minneapolis lifted all daily limits on the March contract, hoping to ensure that the contract would enter into its delivery period in an orderly fashion on Friday.

Nobody wanted to be a seller in this environment, causing the lead contract to quickly surge above $23/bus.

The Minneapolis March contract eventually reached $25 per bushel, before correcting lower to $24 at the close, up $4.75 on the day.

The deferred Minneapolis contracts locked the expanded 90c daily trading limit higher for much of the day.

Limits on those contracts will expand to $1.35 tomorrow, beginning with electronic trade this evening (US central time).

Chicago and Kansas City contracts locked the 60c daily trading limit higher today, with those limits expected to increase to 90c.

(See separate Chicago report)

SOURCE: Farm Progress, US, a Fairfax Media publication

Note: There is a risk associated with trading futures and options. Anyone acting on the Farm Progress, US, information is doing so at this/her own risk.

Latest Comments 5 Comment(s) View Oldest | Newest First Page 1

Posted By: Carlos Wednesday, 27 February 2008 at 8:42:19 AM
Why be surprised?
Was it not planned this way ???
Who is deceiving who ????


Posted By: Cowcocky Wednesday, 27 February 2008 at 8:11:32 AM
Drew,
Do you live in Mosman?


Posted By: Hunter 1 Wednesday, 27 February 2008 at 2:05:18 AM
http://www.godlikeproductions.com/forum ... 419039/pg1
On the list of 100 things that disappear
before/during a panic buy,
grains and flours are listed number 10!
Milk prices are next to go up!


Posted By: ericswan Tuesday, 26 February 2008 at 11:55:37 PM
The grain shortfall has been apparent for the last two growing seasons.
It was exacerbated by Bush's policies but would eventually arrive at this moment none the less.


Posted By: drew Tuesday, 26 February 2008 at 7:32:48 PM
Now is the time for farmers to summer fallow, set aside land or manure plow down.
Supply and demand most experts now agree works.
Get the price of grain up solidly out of the reach of the fuel complex so we can use it to feed people instead.
Most of the grain is being used to feed livestock or SUVs not people.
We have the same people eating cereal in the morning, steak in the afternoon and driving their SUV in the evening.
We need to feed people.
That is what farmers do.
Big companies don't really care what you do with it as long as you make money.
They can recapture the drift profits back from the farmer on the input side so it's all good except for the starving.
Set asides will keep commodity prices up and inputs down, plus feed people.
This matches the supply and demand of "FOOD" in the pipeline so people can in fact eat.
That is what everyone is worried about right now, that and tight input supplies such as fuel and fertilizer and chemicals which are made of and with fuel.
If you put profits aside for a minute and look at what causes what it is pretty easy to solve this "rubiks cube" of food.
We need to share the money and the food to have a better world.
Question is, do we want to?

http://nqr.farmonline.com.au/news_daily.asp?ag_id=48995

Biofuels will not feed the hungry

Published: February 25 2008 20:14 | Last updated: February 25 2008 20:14

Between 1990 and 2005 the proportion of children under five who were underweight declined by one fifth. But that progress is now under threat. Rising food prices mean that malnutrition and starvation once again threaten many of those at the bottom of the world’s economic ladder. While recent spikes in prices are unlikely to be permanent, producers should stop wasting food by subsidising biofuels and give the World Food Programme the funds it needs to distribute calories to those who cannot cope by themselves.

International market prices for wheat, corn, soyabeans and dozens of other commodities have doubled or trebled in recent years. The result is poverty – for millions, a doubling of food prices means destitution – and increased malnutrition. World Food Programme officials have told the Financial Times that the agency may have to cut food rations, or even the number of people it reaches, unless donors provide more cash to pay higher prices.
EDITOR’S CHOICE
Wheat prices in biggest one-day rise - Feb-25
ABF warns of rising costs - Feb-25
High food prices may force aid rationing - Feb-24
Wheat prices surge to new high - Feb-17
In depth: Rising food costs - Sep-03
Shoppers warned bigger bills on way - Feb-24

Some factors affecting prices for the world’s poor are clearly temporary. Bad US and EU harvests in recent years, plus drought in Australia, have reduced grain stocks. There has also been a particular squeeze on internationally trade-able oils and grains, as producers such as Russia introduced export quotas in order to control prices at home. Finally, record shipping rates have made food yet more expensive in the poorer, importing countries that need to buy it most.

Other factors suggest a more permanent change. Food production consumes energy – for machinery, for transportation and most of all to manufacture fertiliser – and if oil prices remain high it will have a lasting effect on food.

Cuts to food production subsidies, most notably in the EU, will also have a permanent effect on supply.

But the biggest structural change is biofuels. In the space of a few years, the US has diverted about 40m tonnes of maize to produce bioethanol – about 4 per cent of global production of coarse grains. That rapid growth is largely the result of subsidies – which must halt. The environmental benefits of maize biofuel are ambiguous at best and it should not be favoured over growing maize for food.

These fundamental pressures, however, should not cause despair. Twenty years ago there were warnings that economic growth in China and India, and consequent increases in calorie intake, would lead to devastating food shortages. So far China has been able to supply its population’s shift to eating meat.

There are serious challenges to increasing food production: limits to available land, soil degradation and access to water among them. But not only are new technologies such as genetic modification adding to output, there is scope to raise productivity in areas such as the former Soviet Union toward the levels of the most productive farmers.

Over the next few years, therefore, prices should stabilise as supply increases and stocks are rebuilt. In the meantime, those governments that are subsidising biofuels need to cough up and help fund the World Food Programme. The world has enough food to feed everybody – if there is the will to do so.

http://www.ft.com/cms/s/0/cfe4dab4-e3d6 ... fd2ac.html

I guess if one was to ever study any history, you would recall all the other 'panics & runs' and attribute them to the events that took place before the Big Stock Market crash of 1929. I do believe there were 12 major bank runs as they were called then, between 1907 & 1929, and then the soup lines.

Coarse, me being of the Conspiracy Theorist catagory, it's only too obvious to me what is, and has been going on. The sad part, is by the time the American Sheeple wake up and realize the facts to the point of seriously wanting to do something about it then, it will be a little too late to accomplish what will need done then.

I am simply amazed every day, to see our own country's leaders and representatives destroy this country, put every American citizen at risk in one way or another, and get paid to do so. I would have thought by now, we'd at least seen 1 or 2 of them punished for their crimes against the Constitution and this country. But instead, I see Gorgeous George still waving that big American smile of his and continues to say, everything is just fine....

A trip to the medecine cabinet is in order now I believe ...

To A Better Day America !

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Give Me Liberty, or Give Me Death ~