Wheat Rises for Second Day on Concern Demand Will Drain World Grain Stocks

Wheat rose for a second day in Chicago on concern that global supplies of grains might fail to keep pace with demand, draining inventories.

The U.S. winter-wheat crop had the lowest government rating in nine years as dry weather persisted in the southern and central Plains, a U.S. Department of Agriculture report showed yesterday. Stockpiles of corn in the U.S. on March 1 dropped to 6.52 billion bushels, the lowest for that date in four years, the USDA said March 31.

“These two reports add to fears that we are going to face the more critical situation of a food crisis,” Ker Chung Yang, a commodity analyst at Phillip Futures Pte, said by phone fromSingapore. “We are likely to see panic buying.”

Wheat for May delivery advanced 5 cents, or 0.6 percent, to $7.95 a bushel at 11:24 a.m. London time on the Chicago Board of Trade. The grain touched $7.9825, the highest level for the most-active contract since March 8. It pared gains after China’s central bank raised keyinterest rates by 0.25 percentage point.

About 37 percent of the U.S. winter-wheat crop was rated good or excellent as of April 3, down from 65 percent a year earlier, the USDA said in its first reading this year measuring conditions. The reading was the lowest for the date since 2002, when 31 percent got the top ratings.

Parts of Texas, Oklahoma, Kansas and Colorado had less than 25 percent of normal rainfall in the past 30 days, according to the National Weather Service. As of April 3, about 12 percent of the Texas crop was in good condition, with no excellent rating. In Kansas, the biggest winter-wheat growing state, 31 percent of the crop was rated good to excellent.

100 Degrees

The southern Plains, where hard winter wheat is grown, have “little chance” of rain in the next week, according to a World Weather Inc. report. In parts of Texas, weekend temperatures topped 100 degrees Fahrenheit as strong winds compounded dry conditions, the forecaster said. Further north, where spring wheat is sown, melting snow may cause “major flooding,” according to the report.

“It’s painting a poorer picture that will raise increasing fears that hot and dry weather may hurt production in the plains,” Phillip Futures’ Ker said. “For the wheat market, we have these bullish factors.”

Milling wheat for May delivery traded on NYSE Liffe in Paris added 7 euros, or 2.8 percent, to 253 euros ($358.40) a metric ton.

Corn for May delivery fell 3.5 cents, or 0.5 percent, to $7.5675 a bushel in Chicago. The grain yesterday reached $7.65, the highest level since July 2008. The most-active contract more than doubled in the past year.

In a report due April 8, the USDA may lower its estimate for corn inventories in the year ending Aug. 31 because of increasing demand for feed and ethanol, said Rich Nelson, the director of research at Allendale Inc. in McHenry, Illinois.

Soybeans for May delivery dropped 9.25 cents, or 0.7 percent, to $13.7475 a bushel.

(Source: http://www.bloomberg.com/news/2011-04-05/corn-near-33-month-peak-as-world-supply-shrinks-as-wheat-at-four-week-high.html)