Wheat Skyrockets to Fresh Records
Wheat prices have rocketed in recent weeks as supplies continue to dwindle, while market analysts have been baffled by the latest swing in the Chicago Board of Trade wheat futures – the largest in the 160-year history of the market.
Unprecedented levels of volatility in the US wheat markets have seen Chicago Wheat trade in a range of nearly $2.70 in one day on Wednesday 27 February, sparking concern and frustration among traders - up until two weeks ago, the market's normal daily trading limit was only 30 cents.
Chicago Wheat hit more than $13 a bushel after first plunging 11% then rising 20% following choppy trading on Wednesday. Overall, prices are up 44% so far in 2008, following on from last year's increase of 77%.
And much of this volatility is down to a range of global factors, including:
- World wheat stockpiles at their lowest for 30 years, forcing prices up
- Increasing orders from foreign markets including South Korea, Taiwan, Mexico, Nigeria and Venezuela
- Spiralling oil prices
- Trade rules and tariffs
Extreme weather in some wheat producing countries, such as droughts in northern China, have affected production levels and driven the price of the remaining wheat up. Meanwhile, Kazakhstan's announcement this week that some 110 million bushels of wheat would now have tariffs assigned to them, in order to curb sales, has added to the increasing concern over the market.
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The above comments do not constitute investment advice and IG Markets accepts no responsibility for any use that may be made of them.
29/02/08