London wheat led a rally in world prices of the grain on Thursday, rising 3.8% to finish at a two-year high.
Wheat prices jumped on all major markets, lifted by the surprisingly low rating attributed to the US winter crop in the first condition report since it was sown. The figure of 47% rated "good" or "excellent" on US Department of Agriculture statistics was the lowest for at least 15 years.
Chicago wheat ended up 2.2% at $7.18 ¼ a bushel, with Kansas and Minneapolis wheat ending at two-year highs. Paris wheat for November adding 2.2% to E223.75 a tonne
Rumours that China is in the market for wheat imports have also supported prices, along with fears that Australia's crop, while plentiful, will prove of relatively low quality thanks to persistent rains.
However, London wheat's gains were particularly notable, bringing the grain back to £170.75 a tonne for November delivery by the close, the strongest finish since April 2008.
'Catch up'
The particularly-strong performance of London wheat, which was made all the more remarkable by a firm performance by sterling, so reducing its attractions to importers, was attributed in part to the exchange's relative weakness in recent sessions.
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Thursday's closing wheat prices
Chicago: $7.18 ¼ a bushel, +2.2%
Kansas: $7.71 ¼ a bushel, +2.3%
London: £170.75 a tonne, +3.8%
Minneapolis: $7.76 ¼ a bushel, +2.4%
Paris: E223.75 a tonne, +2.3%
Prices for near-term contracts |
Even at Thursday's levels, the grain has risen by about 6% since Monday's surprise US data, a little behind the 7% rise in the price of Chicago wheat, the global benchmark.
"It's playing catch up," Jonathan Lane, trading manager at merchant Gleadell, told Agrimoney.com.
However, another trader detected some nerves among buyers who have been staying sidelined in the hope of picking up wheat more cheaply when Australian and Argentine harvests hit the market.
"There is not going to be too much UK grain around early next year, the way exports have gone. Some people are now thinking, with what else is going on, that they had better make the most of it while it's still available," the trader said.
Winter ahead
Although the US crop still has considerable time to make up ground, the extent of its setback, blamed on a dearth of rainfall, has surprised the market, Mike Mawdsley at US broker Market 1 said.
"It hasn't got a lot of time left before going into dormancy," he said.
"If it doesn't come up much better in the spring, well connect the dots and all of a sudden wheat has a story."
Furthermore, with fellow grain corn in demand, and having closed its discount to wheat nearly to $1 a bushel, "it's hard for wheat to back off".
China question
And while the prospect of Chinese imports may appear unlikely, given that the country has stocks of about 60m tonnes, according to the USDA, that does not mean that speculation of purchases can be dismissed, Don Roose, president of US Commodities, said.
"They were supposed to have adequate supplies of corn too, but still bought that," Mr Roose said.
Furthermore, estimates from private analysts question whether China's wheat surplus from this year's crop will prove as comfortable as the 8.7m tonnes that the USDA believes.
Chinese data for other crops, notably corn, have been widely questioned on the belief that a provincial subsidy system based on production levels encourages over-reporting of harvests.
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