Wheat in biggest one-day rise as price soars 25% to record high
By Javier Blas in London and Isabel Gorst in Moscow
Published: February 26 2008 02:00 | Last updated: February 26 2008 02:00
Prices of top-quality wheat jumped 25 per cent yesterday, the biggest one-day increase ever, to a record high as Kazakhstan, one of the world's largest exporters of the grain, said it would impose export tariffs to curb sales.
The move, which follows similar export restrictions in Russia and Argentina, is likely to put further pressure on already tight global wheat supplies, analysts said.
Akhmetzhan Yesimov, Kazakhstan's minister of agriculture, said the government wanted to limit exports as it battled against rising domestic inflation of nearly 20 per cent. "Whatever happens, we will soon limit exports," Mr Yesimov said.
Kazakh grain is similar to some of the scarce top-quality North American crops that jumped in price yesterday.
Spring wheat at the Minneapolis Grain Exchange surged a record $4.75 to a record high of $24 a bushel as consumers scrambled to secure supplies and speculators poured fresh money into the agriculture market.
The price of spring wheat has more than doubled since January and has risen fourfold in the past year, contributing to a rise in global food inflation.
Gavin Maguire, of Iowa Grain in Chicago, said consumers such as mills and bakers, who needed wheat, were "panicking".
"Historical references are useless. We are breaking all the rules," he said.
Iraq and Turkey said they were planning substantial wheat purchases to replenish inventories and analysts said China could be forced to follow because of drought damage to its next crop.
Global supplies of wheat are scarce after extreme weather damaged crops in Australia, Canada and the European Union. As a result, the US is experiencing record demand and its inventories are set to drop to the lowest level in 60 years.
Signs emerged in the bond market yesterday that investors have higher expectations for inflation. The difference between yields on 10-year inflationprotected securities and conventional government bonds rose 3 basis points to 2.41 per cent yesterday, up from a January low of 2.04 per cent, a sign that bond investors are nervous that interest rate cuts from the Federal Reserve may stoke inflation.
