The Wall Street Journal-20080215-Traders Are Eating Up Wheat- Orders From Japan- Egypt Heighten Spring Supply Fears

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Traders Are Eating Up Wheat; Orders From Japan, Egypt Heighten Spring Supply Fears

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Spring wheat futures extended their rally, climbing so high that the Minneapolis Grain Exchange said it will raise its daily trading limit for the third time in less than a week.

Spring wheat futures, traded at the MGE, have surged this year amid strong demand for the high-protein grain and fears that the U.S. could run out of supplies. The trend continued yesterday as nearby MGE March wheat scored a record high of $18.53 a bushel, an increase of nearly 79% on the year.

The latest surge came after Japan said it purchased 190,000 metric tons of wheat, including 77,000 tons of U.S. dark northern spring wheat. Demand for spring wheat has proved to be largely inelastic, despite high prices, as it is used in bakery flour for food products.

The MGE's two front-month contracts rose the exchange's expanded daily trading limit of 90 cents, prompting an increase of the limit to $1.35 effective today. All three U.S. wheat exchanges -- including the Chicago Board of Trade and Kansas City Board of Trade -- raised limits to 60 cents from 30 cents as of Monday. The MGE and KCBT then increased their limits again to 90 cents Wednesday.

The gains at the MGE helped pull prices at the CBOT and KCBT higher, analysts said. The MGE's role as the leader of the rally in wheat is notable considering it is the smallest of the exchanges, said Tom Leffler, owner of Leffler Commodities in Augusta, Kan. MGE March settled at its new high of $18.53, up 90 cents. CBOT March wheat soared 40.50 cents to $10.32, and KCBT March wheat jumped 53 cents to $10.94.

"It's amazing how the little guys run," Mr. Leffler said.

Along with the Japanese purchase, wheat was supported by a pickup in demand from other countries. Egypt's state-owned General Authority for Supply Commodities bought 235,000 tons of wheat, including 115,000 tons of U.S. soft red winter wheat.

The purchase was welcome news after GASC on Wednesday canceled a previous tender for wheat, Mr. Leffler said. SRW wheat is traded at the CBOT and is used in snack foods.

In other trading:

PLATINUM: Prices on the New York Mercantile Exchange closed higher as South Africa's second-largest platinum producer, Impala Platinum Holdings Ltd., said annual production likely would drop because of the country's power shortages. April platinum gained $22.20 to $2,005.90 an ounce.

CRUDE OIL: Futures shot to a five-week high, led by easing concerns about the economy and an increase in perceived risks of a supply disruption. Light, sweet crude for March delivery settled $2.19, or 2.3%, higher at $95.46 a barrel.