CBOT lifts wheat limits

The Chicago Board of Trade said on Thursday it will raise the daily trading limit for its soft red winter wheat futures contract to 40 cents a bushel from 30 cents, effective February 12, in line with competing wheat futures markets.
Separately, the Minneapolis Grain Exchange said it will remove daily price limits on its spot month hard red spring wheat contract, effective for trading on February 25.
The MGE wheat contract has led all wheat futures higher in recent months, setting record prices amid fears of lower supplies and amid soaring export demand.
The changes are subject to approval by the Commodity Futures Trading Commission. The Kansas City Board of Trade also on Thursday raised the daily trading limits for its hard red winter wheat futures contract to 40 cents a bushel from 30 cents.
The changes come in response to unprecedented price spikes for wheat and other grains, fuelled by tighter food and feed grain supplies due to biofuels demand for corn and soybeans.
Record highs for those grains have led to drops in wheat acreage in the US, the top wheat exporter, even as wheat export demand continues to soar. CBOT March wheat ended limit-up at $10.63 a bushel on Thursday. But the contract soared another 30 cents in early electronic trading on Friday in Asia, locked limit-up at $10.93. The contract is up more than 10 percent for the week.
KCBT March wheat was also locked up the 30-cent limit in early Asian trade at $11.40-1/4 a bushel, after rising the limit during the day on Thursday. The spot MGE March spring wheat contract was locked 30 cents higher in Asian trade at $15.53 a bushel, after another limit close during the day on Thursday. Late options trade had indicated that the MGE March wheat futures were near $18.
CBOT, a division of CME Group, said the changes were necessary "to benefit customers who would incur additional market risk from differing price limits among these exchanges."
Analysts and traders have said that a huge influx of capital from Wall Street hedge funds and index funds have helped feed the speculative frenzy for wheat and other grains. Wheat is primarily a food grain, while corn and soybeans are mainly used for livestock feed and industrial products.
The weak dollar and demand from China and other emerging economies, along with worries about drought and crop failures, have pushed US wheat export commitments 60 percent higher than year ago levels as of January 31, according to USDA data.
Soaring wheat futures prices have benefited US farmers and exporters but placed huge strains on grain companies who normally must sell futures contracts to hedge risk and offer collateral in order to obtain bank financing.
As futures have soared, such companies have had to pay millions of dollars in margin calls to exchanges in order to keep their hedges intact. That squeeze on hedgers looks set to continue as daily price limits expand or are removed.