EU wheat continues surge

European milling wheat prices reached new highs on Tuesday, buoyed by an overnight rally in US markets due to strong global demand, and observers said the sharp leap would inevitably lead to hikes in bread prices.
An hour after open, benchmark November on the Paris-based futures was up 9.75 euros more than 3.5 percent at 276.5 euros ($376.7) a tonne, after hitting 280 euros in trade, the highest price ever on the second position of Euronext futures since their launch in 1998.
Other contracts on the milling wheat futures were also higher with rises of between 5.50 and 12.50 euros per tonne. The November contract has more than doubled since the start of April when it traded at 130 euros a tonne and traders and analysts do not expect the trend to reverse soon.
"The objective is clearly to go to 300 euros (per tonne), even if European wheat is too expensive, even if it is overbought and even if it already integrated fundamentals," a trader said, citing strong demand and output worries. Sean Carriage, chief investment strategist at Diapason Commodities Management said: "This should be a reminder of how tight we run some of these agricultural commodities these days." "The days of effortless and easy surpluses particularly on cereal and grain crops are behind us," he added.
Bakers and supermarket chains around Europe have said bread prices would have to rise to compensate for the surge of flour and grain prices. Premier Foods, Britain's biggest food producer, announced a hike in the price of its Hooves bread on Tuesday and said it may need to make further increases if wheat prices remain around their current highs.
"We'll be very surprised if general bread prices don't go up because the pressures upon us all are the same," Chief Executive Robert Schooled told Reuters in a telephone interview. The Bernie-based International Union of Bakers and Bakers-Confectioners said on Monday in Budapest that prices were rising globally and that it expected this trend to continue.
Wheat futures on the Chicago Board of Trade in electronic-trading hours with most active December wheat up 30 cents (the limit up) at $8.05-1/2, not far off its all-time high of $8.07-3/4 per bushel. India on Monday decided to buy 795,000 tonnes of wheat to build stocks, 50 percent more than the initial amount offered at last month's import tender. The regular CBOT market was closed on Monday for the US Labour Day holiday.