Wheat Resumes Plunge as African Unrest Drives Away Speculators

Wheat extended a collapse and corn and soybeans also fell as traders speculated that a jump in energy costs caused by protests across North Africa and the Middle East will curb growth and demand for grains.

Riots already ousted leaders in Egypt, the world’s biggest wheat importer, and in Tunisia, and opposition groups have seized control of eastern cities in Libya. While wheat traded in Chicago dropped 10 percent in the past four sessions, crude oil traded inNew York jumped 14 percent.

Grain prices surged last month as North African and Middle East nations bought more shipments to damp a surge in domestic prices that helped spark the protests from Morocco to Bahrain. Speculators including hedge funds last week cut their bets on higher wheat prices by 20 percent, U.S. Commodity Futures Trading Commission data show.

“Everyone has been bullish corn and wheat for an extended period,” Michael Pitts, commodity sales director at National Australia Bank Ltd., said by phone from Sydney today. The unrest in North Africa and the Middle East meant “they really ignored some positive fundamentals and sold off.”

Wheat for May delivery fell 6.25 cents, or 0.8 percent, to $7.92 a bushel on the Chicago Board of Trade by 11:31 a.m. in London. The price yesterday closed 0.3 percent higher after Egypt bought French and U.S. grain, and on speculation that other North African countries planned purchases. Futures had earlier declined as much as 4.9 percent.

Egypt bought 120,000 metric tons of wheat from France and 115,000 tons from the U.S., Nomani Nomani, vice chairman of the General Authority for Supply Commodities, said yesterday.

Saudi Arabia

Saudi Arabia may buy 275,000 tons of milling wheat to capitalize on lower prices, the Chicago Board of Trade’s parent CME Group said on its website. Iraq two days ago tendered for 100,000 tons of wheat, according to the Grain Board of Iraq.

Corn for May delivery declined 4.75 cents, or 0.7 percent, to $6.975 a bushel and soybeans dropped 13.75 cents, or 1 percent, to $13.1775 a bushel. Corn and soybeans also closed higher yesterday as higher oil prices may boost demand for biofuels made from the commodities. Rice climbed 1.1 percent.

North African and Middle East countries are expected to buy 39.3 million tons of wheat in the 2010-11 marketing year, accounting for 32 percent of world purchases, U.S. Department of Agriculture data show. At the same time, U.S. farmers will increase planting of corn, soybeans, wheat, cotton and four other crops by 4.2 percent to 255.3 million acres in 2011, boosting supplies, the USDA said Feb. 14.

Agriculture Index

The Standard & Poor’s GSCI Agriculture Index of futures doubled since July and the United Nations says global food prices reached a record last month. The U.S., the biggest exporter, is forecasting a 49 percent jump in its wheat exports in the 12 months ending in June, the most in 18 years.

Speculators including hedge funds last week cut their bets on higher wheat prices by 20 percent, CFTC data show. Hedge fund managers and other speculators held a net-long position, or bets on higher Chicago wheat prices, of 34,193 contracts by Feb. 15. A week earlier, they held 42,635 contracts, the most since 1997, according to data from the CFTC.

“It’s not surprising to see the declines because of increasing risk aversion in the market,” saidEugen Weinberg, head of commodity research at Commerzbank AG in Frankfurt. “Gold is inching higher and oil is definitely experiencing some inflows.”

Oil traded in London rose as much as 7.7 percent to $119.79 a barrel today. Gold added 0.2 percent to $1,414.38 an ounce and the Swiss franc climbed to a record against the dollar and the yen strengthened to a two-week high as investors sought assets perceived to be safer.

(Source: http://www.bloomberg.com/news/2011-02-24/wheat-extends-collapse-after-north-african-unrest-drives-away-speculators.html)