Wheat prices keep growing

Marketplace Staff Oct 12, 2006

KAI RYSSDAL: Mostly quiet on the commodities markets today. Oil was up a touch. Gold held steady. Wheat, though, has been popping. Futures closed just off a 10-year high.

From Chicago Public Radio, Mike Rhee reports the reason lies down under.

MIKE RHEE: Australia was supposed to produce about 25 million tons of wheat this year, but a drought has cut the projection to less than half that. Wheat production in the U.S. this year was slimmer than usual, too, for the same reason.

Vic Lespinasse is a market analyst with A.G. Edwards. He says the shortage is worldwide.

VIC LESPINASSE:“Some other countries like the Ukraine have recently stopped exporting wheat. India had a short wheat crop this year and they were forced to buy about 5.5 million tons of wheat, whereas in years past they were a wheat exporter.”

Lespinasse says farmers will likely plant more wheat next year because of those higher prices. How this plays out in the price of things like bread, cereal and animal feed remains to be seen.

This summer, Kellogg’s said it would raise prices on some cereals by about 2 percent to cover higher commodity costs. Speculators are bidding the price of wheat up on commodities markets.

Twice this week the price of wheat has jumped to the ceiling on increases allowed by the Chicago Board of Trade. That limit is 30 cents on the bushel.

Analysts say that the price of wheat is likely to remain high over the next few months.

From Chicago, I’m Mike Rhee for Marketplace.

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