Wheat Hits Record on US Inventory Report

Wheat futures hit a record high for a third day Friday, soaring near $11 a bushel in Chicago after a U.S. government report confirmed dwindling stockpiles of the grain used to make bread, pasta and other foods.

Wheat's rally lifted other agriculture commodities, with corn and soybean futures trading sharply higher. Precious metals and energy futures also rose.

Wheat prices have surged to historic highs as bad weather has battered crop after crop around the globe, most recently in India and Canada. Foreign buyers scrambling to lock in supplies have increasingly turned to the United States, which is exporting the grain at record pace. The U.S. Department of Agriculture issued a bullish report Friday predicting U.S. wheat inventories will total 272 million bushels by the end of May, the lowest in more than five decades and about 7 percent less than expected last month.

"There's only one thing going on with wheat and that's a shortage of red wheat that can be milled into bread and pasta," said Elaine Kub, analyst with DTN. "People are just buying up whatever wheat they can."

Wheat for March delivery surged the 30-cent daily limit to settle at $10.93 a bushel on the Chicago Board of Trade the highest ever for that contract. Wheat also hit record-highs on Thursday and Wednesday.

Unprecedented demand for agricultural products from fast-growing countries including China and India has exacerbated the supply crunch for wheat, which has more than doubled in price since last year.

The higher wheat prices may not immediately affect U.S. consumers since big food companies like Kellogg Co., General Mills Inc., and Kraft Foods Inc. typically protect themselves from price volatility with long-term supply contracts. But the spike could lead foreign government to implement price controls to thwart already rising food inflation, especially in developing countries, analysts say.

"People must eat so you may see governments stepping in to help citizens," Kub said. " You're already seeing problems in places like Pakistan, where they're literally running out of flour and wheat."