A slump in sterling, fostered by weak economic data, bumped London wheat up by nearly 3% to its highest since July.

The pound lost 3 cents against the dollar, and was on track for its biggest one-day decline against the euro for six months, after official data showed that the UK economy shrank by 0.4% during the July-to-September quarter.

The drop, which placed the UK economy in its worst recession since records began, stunned the City, which had been expecting growth of 0.2% in the quarter.

However, sterling's collapse, as thoughts of an interest rate rise were pushed back, helped London wheat for November settle up £2.00 at £105.50 a tonne, its highest since July 24. The contract touched £106.50 a tonne earlier.

A cheaper pound makes UK wheat more competitive against foreign grain.

'Plenty around'

Prices were also helped by a stronger Chicago market, which has been supported by fund inflows in the face of rising inflation fears and delayed US corn and soybean harvests.

Chicago's benchmark December contract stood 1.5% higher at $5.60 a bushel in late deals.

However, David Sheppard, managing director of UK grain merchant Gleadell, urged caution over future rises in the face of rich global supplies of wheat.

"There is plenty of wheat around," he told Agrimoney.com.

"We are buying a lot of grain, but we are hedging it. We are not holding it. We do not want to be left holding the baby at the moment when the music stops."

Farming shrinks 

The UK economy has now contracted for six successive quarters, the longest stretch since records began in 1955.

The report also showed UK agriculture shrinking 1.6%, quarter on quarter, a fifth consecutive quarter of decline.

UK farm output has now contracted by nearly 10% since 2005, compared with a marginal growth across the economy as a whole.