Grain, Soybeans Rise as Food Riots Spur Demand for U.S. Exports

Grain, Soybeans Rise
Wheat rose, heading for the longest rally since November 2009. Photographer: Carla Gottgens/Bloomberg

Wheat rose, capping the longest rally since November 2009, while corn and soybeans climbed as countries increase purchases from the U.S., the world’s biggest exporter, to cut food inflation and quell civil unrest.

Food-exporting countries are “strongly advised” not to restrict shipments to prevent “more uncertainty and disruption” in world markets, the United Nations said. Governments in Egypt, Algeria, Morocco and Yemen have faced protests amid rising costs and high unemployment, and a revolt toppled Tunisia’s leader.

“Sovereign nations are beginning to stockpile food to prevent unrest, and that will help to boost demand for U.S. grains,” said Jim Gerlach, the president of A/C Trading Inc. in Fowler, Indiana. “You artificially stimulate much higher demand when nations start to increase stockpiles.”

Wheat futures for March delivery rose 18.25 cents, or 2.2 percent, to close at $8.565 a bushel at 1:15 p.m. on the Chicago Board of Trade, capping a seven-day advance of 11 percent. Earlier, the price reached $8.6125, the highest for a most-active contract since Aug. 6. The grain has jumped 73 percent in the past 12 months.

Corn futures for March delivery climbed 13.75 cents, or 2.1 percent, to $6.5775 a bushel, the first gain in three sessions. The price has surged 82 percent in the past 12 months.

Soybean futures for March delivery advanced 11 cents, or 0.8 percent, to $13.855 a bushel. The oilseed has gained 46 percent in the past year.

Topple Governments

The commodities climbed in 2010 after drought slashed crops in Russia, Ukraine and other parts of Europe, and adverse weather reduced harvests in the U.S., Canada and Australia. Governments from Beijing to Belgrade are increasing imports, limiting exports or releasing supply from state stockpiles to curb food inflation.

A surge in food and energy costs is stoking inflation in emerging markets and causing riots that may topple governments, Nouriel Roubini, the New York University economist who predicted the financial crisis, said today in an interview in Davos, Switzerland, with Tom Keene on Bloomberg Television’s “The Pulse.”

“When you look at what’s happened in the former Soviet Union and Australia, wheat supplies are tight,” said Dan Kuechenmeister, the manager of the commodities department at RBC Dain Rauscher in Minneapolis, Minnesota. “You hear about the food riots in parts of the Middle East. There’s just all sorts of things out there that have people a little bit on edge.”

Algeria agreed to buy 800,000 metric tons of wheat today and ordered the state-run grain agency to speed up imports, Reuters reported.

China Outlook

Demand may increase in China, the leading soybean importer and the second-biggest corn consumer, said Dan Cekander, the director of grain research for Newedge USA LLC in Chicago.

Today, U.S. exporters reported sales of 227,000 tons of soybeans to China, the U.S. Department of Agriculture said. Yesterday, the agency announced a record one-day sale of 2.74 million tons to the Asian nation.

China may be “virtually out” of corn and might boost imports after demand from livestock producers sent the domestic price of the grain surging close to $8.50, Sterling Liddell, a vice president at Rabo Agrifinance, said today at a conference in Chicago.

In the 12 months that ended Sept. 30, China was a net importer of corn for the first time in 14 years, USDA data show.

“A lot of today’s strength is related to speculation about increased Chinese imports,” Cekander said. “Chinese demand is a wildcard.”

Corn is the largest U.S. crop, valued at $48.6 billion in 2009, followed by soybeans at $31.8 billion, government data show. Wheat was the fourth-biggest at $10.6 billion, behind hay.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE