European wheat prices jumped more than 5% today after US wheat futures scaled new records as investor capital flooded in and supply concerns dominated sentiment.
Activity on the Chicago Board of Trade, where benchmark March contracts surged the maximum 60 cents a bushel allowed under new widened price limits, set the tone in Europe, where some traders spoke of a possible return to all-time highs.
The Chicago Board of Trade front month contract has risen 25% since January 30, hitting four consecutive record highs on signs of rapidly tightening supplies and expectations that global demand will be undiminished by an economic downturn.
Brokers and industry analysts said wheat's rally was far from over. Wheat and other grain markets had missed out on the boom in commodities until last year, when the rally in industrial metals prices petered out and investors began seeking other plays that may fare better than those most exposed to economic activity.
Goldman Sachs raised its three and six-month outlooks for Chicago wheat futures by 47% to $13.50 a bushel after the U.S. Department of Agriculture cut projected 2007/08 US wheat ending stocks to 272 million bushels, the lowest since 1947/48.
Wheat prices have climbed with corn, soybeans and other crops as strong global growth fuels increased demand from around the world, fanning inflation fears. Some crops are also in demand as an alternative, cleaner source of fuel.
In Australia, the second-largest wheat exporter after the US, July wheat futures on the Australian Stock Exchange jumped today by A$45 a tonne to a new record of A$550 a tonne. This easily passed a record set on Friday of A$504 a tonne for the March futures contract.
