The Wall Street Journal-20080206-Wheat Futures Set a Record- Demand Surges In Minneapolis On March Contract

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Wheat Futures Set a Record; Demand Surges In Minneapolis On March Contract

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U.S. wheat futures rose to record highs as the smallest of three domestic exchanges continued to lead a rally aimed at shutting off demand for spring wheat.

The Minneapolis Grain Exchange, often overshadowed by the larger- volume Chicago Board of Trade and Kansas City Board of Trade, saw its nearby March contract rise to the exchange-imposed daily limit of 30 cents to $14.63. That is the highest price for any wheat contract traded at a U.S. exchange. Beginning Feb. 12, the MGE price limit will be 40 cents.

MGE March wheat has climbed at a breakneck pace since the beginning of the year, as demand for high-protein spring wheat, one of the types of wheat grown in the U.S., remains strong despite surging prices and historically low supplies. The contract is already up $4.2675 since the beginning of the year, a 41% increase.

It is difficult to ration demand for spring wheat because it is used to make bread and other food products, said Chad Henderson, analyst for Prime Agricultural Consultants. Japan said overnight it was seeking 172,000 metric tons of wheat, including 81,000 tons of U.S. dark northern spring wheat and 45,000 tons of U.S. semi-hard wheat.

"If it's used as a food-grade wheat, what kind of price do you put on people going hungry?" Mr. Henderson asked. "It's a demand for milling quality wheat not only here in the U.S. but also world-wide."

Statistics Canada, the statistical branch of the Canadian government, also boosted prices higher by cutting its estimate for all-wheat ending stocks below analysts' expectations. Ending stocks are what is left after taking into consideration supply and demand.

Egypt, meanwhile, said after trading ended that it will tender today to buy wheat. Although the tender was not for spring wheat, the news was seen as bullish because Egypt often buys on price breaks, traders said.

The MGE's current rally dates from mid-January when a report from the U.S. Department of Agriculture showed winter-wheat acreage in the southern Plains was less than expected, even with record wheat prices. Winter-wheat is planted in the fall and harvested in the spring. The smaller winter-wheat acreage meant spring-planted wheat in the Northern Plains would need to make up the shortfall, but its land will compete with corn and soybean planting.

In other commodity markets:

CRUDE OIL: Futures fell nearly 2% to $88.41 a barrel, on the New York Mercantile Exchange, its lowest close since Jan. 23. The decline was precipitated by several factors, including a weak report from the Institute of Supply Management that revived anxiety that a U.S. economic downturn would depress energy demand. Other bearish factors included a strengthening dollar and anticipation that today's inventory report would show an increase in oil stockpiles.

NATURAL GAS: The weakness in the oil market contained yesterday's rally in the natural-gas market, which was spurred on by forecasts of colder weather in the Northeast and Midwest and by maintenance at nuclear plants that led to higher gas demand. Natural-gas futures for March delivery on Nymex closed at $7.842 a million British thermal units, up 7.3 cents.