Wheat Price Rises Above $10 for First Time on Supply Concerns

Dec. 17 -- Wheat rose above $10 a bushel for the first time and soybean and corn prices surged, fueling inflation that's threatening to derail global growth.

Chicago wheat futures jumped by the exchange-imposed daily limit to $10.095 a bushel as dry weather threatened crops in Argentina, renewing concern that farmers may fail to supply enough to meet rising demand. Soybeans advanced to $11.9225 a bushel, the highest in 34 years, and corn rose to $4.4325 a bushel, a nine-month peak.

Food companies such as Kellogg Co. and General Mills Inc. have raised prices because of higher wheat costs, which are stoking inflation and making it more difficult for the world's central bankers to lower interest rates. Sara Lee Corp. said Dec. 13 it will increase bread prices for a second time since September to counter higher input costs.

``Global supply is really tight at this time,'' Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia, said from Sydney. ``Saying there's a near-term top in the price is a very dangerous thing to do.''

Dry, warm weather may hurt yields in Argentina, the world's fourth-largest wheat exporter, after a freeze last month damaged plants in Buenos Aires, the nation's largest wheat-producing state, forecaster Meteorlogix LLC said Dec. 14. A smaller crop may reduce global inventories that the U.S. government says will drop 11 percent by May 31 to 110.1 million metric tons.

`Fear Factor'

``People need to eat and that's part of the fear factor in this environment,'' Brett Cooper, senior client adviser, commodities, with broker MF Global Australia Ltd., said from Sydney. Prices may extend gains, he said.

Wheat for March delivery, the most-active contract, traded at $10.07 a bushel, up 2.8 percent, in after-hours electronic trading on the Chicago Board of Trade at 2:09 p.m. Sydney time. The price has more than doubled in the past year as adverse weather reduced output from Australia to the U.S. and Canada.

``There's people saying potentially $11 or even $13,'' Cooper said. ``All things certainly point to a crack at $11 in the short-term. These things tend to move very quickly, so if the momentum is there, it could be some time this week.''

Soybean futures for March delivery rose as much as 17.25 cents, or 1.5 percent, to $11.9225 a bushel on the Chicago Board of Trade and were at $11.85 at 2:08 p.m. Sydney time. Prices have gained 73 percent this year after U.S. farmers planted the fewest acres in 12 years in favor of corn.

Corn for March delivery rose as much as 5 cents, or 1.1 percent, to $4.4325 a bushel in Chicago and were at $4.415 in after-hours trading at 2:10 p.m. in Sydney. Corn is up 13 percent this year.

U.S. consumer prices rose the most in more than two years last month, reinforcing the Federal Reserve's concern that inflation will erode confidence in the economy. The consumer price index increased 0.8 percent in November, up from 0.3 percent the previous month, the Labor Department said Dec. 14.

Inflation in Europe last month rose at its fastest annual pace since May 2001, increasing by 3.1 percent as food costs soared.