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 11 percent in the past four sessions, crude oil jumped 13 percent on the New York Mercantile Exchange.

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.

“Investors continue to exit grain positions in favor of energy and financial markets due to anxiety over political unrest in the Middle East and North Africa,” Jim Gerlach, president of A/C Trading Inc., said by phone from Fowler, Indiana. “The markets are focused on the negative impact that higher energy prices may have on the global economy and food demand.”

Wheat for May delivery fell 15.75 cents, or 2 percent, to close at $7.825 a bushel at 1:15 p.m. on the Chicago Board of Trade. Yesterday, the price gained 0.3 percent on signs of rising demand. Egypt bought 120,000 metric tons 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, CME Group said in a report on its website. Iraq tendered for 100,000 tons of wheat this week.

Corn futures for May delivery declined 5.75 cents, or 0.8 percent, to close at $6.965 a bushel on the CBOT, and soybean futures for May delivery dropped 2.25 cents, or 0.2 percent, to settle at $13.2925 a bushel. Corn and soybeans also closed higher yesterday.

North African and Middle East countries are expected to buy 39.3 million tons of wheat in the 2010-2011 marketing year, accounting for 32 percent of world purchases, U.S. Department of Agriculture data show.

The Standard & Poor’s GSCI Agriculture Index of futures has jumped 47 percent since July, and the United Nations said world food prices rose 25 percent last year and reached a record in January. U.S. food costs will rise as much as 4 percent this year because of rising commodity prices, Joe Glauber, the USDA’s chief economist, said at a conference today.

Bigger Crops

Farmers will harvest a record 13.73 billion bushels of corn, up from 12.447 billion last year, with 5 billion bushels devoted to ethanol, compared with 4.95 billion for the 2010 crop, Glauber said at the department’s annual outlook conference in Arlington, Virginia, today.

Hedge-fund managers and other speculators held a net-long position, or bets on higher Chicago wheat prices, of 34,193 contracts as of Feb. 15, CFTC data show. A week earlier, they held 42,635 contracts, the most since 1997.

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

Oil traded in New York rose as much as 5.4 percent to $103.41 a barrel today, before closing at $97.28, down 0.8 percent. Gold rose $1.80 to close at $1,415.80 an ounce in New York, 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.

To contact the reporters on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net; Tony Dreibus in London at tdreibus@bloomberg.net

To contact the editors responsible for this story: Steve Stroth at sstroth@bloomberg.net; Claudia Carpenter at ccarpenter2@bloomberg.net

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