Wheat Rises on Corn Rally as Grains Compete in Animal-Feed Mix
By Tony C. Dreibus
July 2 (Bloomberg) -- Wheat rose in tandem with a rally in corn prices because the grains compete feed for livestock and for acreage on U.S. farms.
Corn is up 71 percent this year, reaching an all-time high on June 27 after floods wiped out some crops in the Midwest. Wheat has dropped 0.5 percent in 2008 after farmers worldwide seeded more of the grain. As the price gap between corn and wheat narrows, some ranchers will use wheat to feed livestock, reducing reserves.
``If corn rises, they're connected at the hip,'' said Jason Britt, president of Central States Commodities Inc. in Kansas City, Missouri. ``A lot of that goes to feed equations and the acreage battle'' as farmers plan sowing crops in the U.S. autumn, he said.
Wheat futures for September delivery rose 15.5 cents, or 1.8 percent, to $8.8025 a bushel on the Chicago Board of Trade. The most-active contract gained 55 percent in the past year after adverse weather curbed global production in 2007. The price has still dropped 35 percent from a record $13.495 a bushel on Feb. 27.
Corn climbed almost 4 percent today, and soybeans surged to a record for the second straight day.
``You can't trade in a vacuum with the corn markets doing what they're doing,'' Britt said. ``If the focus was just on wheat, we could figure out the fundamentals and make a realistic guess as to where prices should be. Throw in the $8 corn and $16 beans, and it makes it harder to gauge fair price.''
Feed Demand
U.S. livestock producers are expected to feed animals 255 million bushels of wheat in the year that started June 1, more than four times the prior year, the U.S. Department of Agriculture said on June 10. U.S. production will increase 18 percent to 66.2 million tons by May 31, the government said. Inventories are expected to almost double to 13.3 million tons, USDA data show.
Global wheat inventories are expected to jump 15 percent to 132.1 million tons this marketing year, USDA data show. Production is expected to rise 8.5 percent to 662.9 million tons, the USDA said.
Prices also gained on signs of increased demand. Iraq plans to import 50,000 tons from global stockpiles, setting a July 13 deadline for offers, the Iraqi Ministry of Trade said on its Web site yesterday.
Advance sales of U.S. wheat since June 1 are 45 percent ahead of the same period a year earlier, USDA data show. Exporters have shipped 1.25 million metric tons, up 15 percent, the government said this week.
The slumping dollar also has spurred demand for U.S. grain.
``Export tenders are going to remain fairly firm,'' Britt said. ``There are supporting factors underneath this thing. The weak dollar will keep exports competitive.''
Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007, behind corn, soybeans and hay, government data show.
