Wheat futures on the Chicago Board of Trade staged another surge to all-time highs on Tuesday on supply-based concerns, including a drawdown in Canadian stocks and worries about Australian wheat crop prospects, traders said.
Prices soared toward the close as sellers stayed on the sidelines, forcing commercials and speculators to pay up to cover short positions. CBOT December and March wheat rose the daily maximum of 30 cents a bushel toward the closing bell, nearing the $9 mark.
CBOT December settled up 29-1/2 cents at $8.90-1/2 per bushel after reaching $8.91, and March closed up the 30-cent limit at $8.91-1/2, a record high price for any wheat contract month. Volume was estimated by the CBOT at 58,780 wheat futures and 22,150 options.
Kansas City Board of Trade December wheat settled up 30 cents at $8.59 and spot September hit $8.60, an all-time high for the KCBT market. Minneapolis Grain Exchange March spring wheat touched a record high at $8.30.
Wheat futures drew early support after Statistics Canada reported Canada's wheat stocks as of July 31 at 6.8 million tonnes, down 29 percent from a year ago and below trade estimates for 7 million to 8.6 million. "People are scared to sell wheat. Statistics Canada is the most important thing today," one CBOT wheat trader said.
Support also stemmed from ideas that dry weather was shrinking the size of Australia's developing wheat crop. The head of the Grains Council of Australia said the crop was forecast to shrink to 15 million tonnes or less, well below USDA's August estimate of 23 million.
Underscoring the consumer impact of the rally in wheat prices, Sara Lee Corp might raise bread prices further if wheat prices stay above $8 a bushel, a company executive said Tuesday. Sara Lee just implemented a previously announced price increase of 5 percent in its US bakery business on Monday.
In a nod to rising food costs and tight world grain supplies, US Agriculture Secretary Mike Johanns said the government would decide in coming months whether to release land from a long-term conservation reserve program to expand US crop production.
Traders anticipated that USDA would lower its estimates of US and world wheat ending stocks on Wednesday, but those expectations may be factored in to prices already. "The market is going to be very proactive about not waiting around for USDA to verify stocks slippage. It's going to pre-emptively arrive at a price that ensures that our wheat situation is going to be rationed," said Rich Feltes, senior vice president and director of MF Global Research in Chicago.
In export news, Egypt's Holding Company for Food Industries tendered to buy optional-origin milling wheat. And Japan said it would buy 155,000 tonnes of US, Canadian and Australian wheat at its weekly tender on Thursday.