Wheat heads for longest winning streak in 16 mths

Wheat advanced for eighth day in Chicago, its longest winning streak in 16 months, after the US reported a smaller-than-expected harvest, adding pressure to shrinking stockpiles and rising food prices.

Wheat inventories were smaller than what analysts had expected and the total harvest was 2.2 per cent less than the August estimate, the US government said September 28. The International Grains Council the day before said combined wheat stockpiles in the five biggest wheat exporting nations will fall to a 34-year low.

"We don't have the land and we don't have the technology'' yet to increase production, said Greg Smith, founder of Global Commodities, which manages a $210 million commodities fund. "Prices going forward are going to be high.''

Wheat prices have more than doubled in six months, spurring companies including Premier Foods, the UK maker of Hovis bread, to raise prices. William Morrison Supermarkets, the smallest of Britain's four major grocery chains, said September 20 that the higher costs would "inevitably'' mean higher retail prices for anything containing flour or milk.

Wheat for December delivery rose as much as 19.50 cents, or 2.1 per cent, to $9.585 a bushel on the Chicago Board of Trade and traded at $9.5125 in after-hours electronic trading at 11:11 am London time. Prices last had an eight-day winning streak in May, 2006.

The prices are hurting profits for food producers such as Tyson Foods and Kraft Foods. Prices for goods such as pasta and bread are gaining, prompting a consumer boycott of the products in Italy last month.

Egypt, Iraq, Japan, Jordan, Morocco and Pakistan last month announced plans to buy the grain.

"There's been no sign that importers are reducing their purchasing amounts or delaying purchases because of record high prices,'' said Takaki Shigemoto, an analyst at Okachi & Co in Tokyo.

About 1.717 billion bushels were in storage as of September 1, down 1.9 per cent from 1.751 billion a year earlier, the US Department of Agriculture said. That's less than the average 1.839 billion forecast by 11 analysts in a Bloomberg survey. The total US harvest was 2.067 billion bushels, the USDA said.

Wheat inventories in the US, the European Union, Canada, Argentina and Australia will drop by 13 million tonnes to 25 million tonnes in the year ending June 2008, the London-based council said September 27. US stockpiles will fall to less than 9 million tonnes, the lowest since 1951-52, the IGC said.

The council cut its forecast for the global wheat harvest in 2007-08 by 1 per cent to 601 million tonnes. The IGC expects Australia to produce 13.5 million tonnes of wheat, less than the Australian Bureau of Agricultural and Resource Economics' forecast of 15.5 million tons on September 18.

Morocco invited bids for 133,450 tonnes on September 28, while Japan is seeking 64,000 tonnes of feed wheat on October 3 and plans to issue another tender tomorrow to buy milling wheat on October 4. South Korean flour millers issued tenders to buy total 73,000 tons of US wheat tomorrow.

Wheat for November delivery on the Euronext.liffe exchange gained 2.75 euros, or 1 per cent, to 271 euros ($386) a tonnes as of 12:40 pm in Paris. Prices have gained 82 percent in a year.