Wheat dips as traders cash in on record rise

Wheat futures fell in Chicago as speculators took advantage of two consecutive days of records to reduce their positions.

Futures for December delivery on the Chicago Board of Trade dropped 12.5 cents, or 1.5 per cent, to $8.23 a bushel at 11:30 a.m. in London, the biggest drop since August 15.

The contract earlier rose to a record $8.49 after the state of South Australia said production of the grain may be 24 per cent less than earlier forecast.

"People are probably not getting out entirely, they're just locking in profit," Riaan van der Berg, a grain trader at Robinson Mulder de Waal Financial Services in Pretoria, South Africa, said by phone.

Egypt, the biggest importer of wheat after Brazil, as well as Iraq, India, Korea and Taiwan bought the grain this week as they secured supplies on concern prices may extend gains. Wheat is used in foods from breakfast cereals to bread, cakes and noodles, and also as feed for livestock.

Nissin Food Products in Japan will raise prices on its famous Cup O' Noodles and instant noodles for the first time since 1990, because of higher wheat prices. Premier Foods, the UK maker of Hovis bread, has already increased prices and on September 4 said it would do so again unless costs decline.

"It's largely profit taking; speculators have had a good run," Andrew Fletcher, a futures trader at Unigrain, said by phone from Kroonstad, South Africa, on Thursday. Wheat for November delivery on the Euronext.liffe exchange fell 6.50 euros, or 2.3 per cent, to 279.50 euros ($382) a tonne as of 12:32 p.m. in Paris.

Egypt, the world's second-largest wheat importer, bought 470,000 tonnes of the US and Russian wheat at record prices yesterday, prompting the government to increase bread subsidies.

"Unfortunately the suppliers dictate the price because there is not much wheat left," Nomani Nomani, undersecretary of trade and deputy chairman of the state buyer, said from Cairo yesterday after the tender.

Global supplies of the grain are expected to decline to 114.8 million tonnes by the end of the marketing year on May 31, 2008, the US Department of Agriculture said last month. Inventories have fallen as adverse weather cut harvests in Europe, the US, Canada and Australia.

India this week purchased 795,000 tonnes and Japan said it's seeking 175,000 tonnes of milling wheat.