Wheat Jumps to Highest Since 2008 as Chinese Crop Faces Drought

China intensifies drought-fighting efforts in wheat-growing regions (Xinhua):

BEIJING, Jan.27 (Xinhua) — China’s State Council, the nation’s cabinet, pledged Thursday to step up efforts to fight the prolonged drought in the country’s northern wheat-growing regions.

North China wheat-growing regions, including Shandong, Henan, Hebei, Anhui, Shanxi and Jiangsu provinces, have received little rainfall since October last year.


Drought affecting more than 2 mln people in China (China TEFL Network):

BEIJING – About 2.2 million people in China are short of drinking water as severe droughts continue to plague winter wheat producing areas, said the nation ‘s drought relief authorities on Monday.

Photo taken on Jan 14, 2011 shows withered wheat seedlings in Bozhou, Anhui province suffers serious drought. [Photo/Xinhua]

Rainfall in Henan, Shanxi, Hebei, Shandong, Jiangsu, Anhui and Shaanxi provinces has decreased 20 to 90 percent over the last four months from the same-period average, said Chen Lei, deputy director of the State Flood Control and Drought Relief Headquarters.

Relentless droughts that started to dry out winter wheat producing areas such as Shandong and Henan provinces in November continue, affecting some 4 million hectares of cropland, said Chen.



China, the largest wheat producer, is facing severe drought in the main, winter-wheat growing region.

(Bloomberg) — Wheat rose to the highest in more than two years in Chicago as drought threatened crops in China, the world’s biggest grower, and as governments increased purchases to contain inflation and protests.

Wheat has surged 83 percent in Chicago and doubled in Paris in the past year as drought in Russia and floods in Canada and Australia hurt crops. Countries in the Middle East and North Africa are speeding up grain purchases after rising food prices contributed to riots and protests. Now China is facing severe drought in the main winter-wheat growing region.

“Wheat is at the center of issues for the market now,” said Han Sung Min, a broker at Korea Exchange Bank Futures Co. in Seoul. “China’s poor crop weather has fueled concern over tightening supplies after some countries in North Africa and the Middle East rushed to secure food.”

Protests have spread across North Africa and the Middle East in the last month, driving Tunisia’s President Zine El Abidine Ben Ali into exile after 23 years in power and Egyptian President Hosni Mubarak to pledge an end to his three-decade- long rule by September. Riots erupted in part because of food prices the United Nations says reached a record last month. China raised interest rates for the third time in four months from today to contain inflation.

March-delivery wheat rose as much as 1.2 percent to $8.845 a bushel on the Chicago Board of Trade, the highest since August 2008, and was at $8.8325 at 1:36 p.m. Paris time.

Wheat Growing

The drought in China’s wheat-growing regions may worsen “rapidly” as the weather gets warmer, the Ministry of Agriculture said Feb. 4. The drought affected 35 percent of wheat crops in eight provinces as of that date, it said.

“On the weather front, the drought in China is at center- stage right now, as wheat is starting to come out of dormancy,” Paris-based farm adviser Agritel said in a commentary today.

Milling wheat for March delivery traded on NYSE Liffe in Paris rose 1 percent to 278.75 euros ($380.16) a metric ton, while November-delivery wheat, the contract with the most volume and greatest open interest, rose 1.4 percent to 245 euros.

France will export 12.1 million tons of soft wheat outside the European Union in the year through June, crops office FranceAgriMer said today, raising last month’s estimate by 300,000 tons.

Chinese wheat output may have dropped to 114.5 million tons at the last harvest, compared with 115.1 million tons a year earlier, according to U.S. Department of Agriculture estimates. Macquarie expects output to drop a further 4 million tons this year. The USDA will update its outlook today.

Wheat Reserves

U.S. wheat reserves on May 31 probably will total 808.3 million bushels, compared with 818 million forecast in January and 976 million a year earlier, a Bloomberg survey showed. World wheat inventories may decline to 177.2 million tons, a survey found, from 178 million estimated by the USDA in January and 197.4 million a year earlier.

The USDA may cut its forecast for world corn inventories before the Northern Hemisphere harvests to 125.4 million tons, from 127 million estimated in January and 147.1 million a year earlier, the survey showed. That would be the lowest level of reserves since 2007.

March-delivery corn rose as much as 1 percent to $6.8025 a bushel and was last at $6.79. The price reached $6.825 on Feb. 7, the highest since July 15, 2008.

Soybeans for March delivery gained as much as 0.6 percent to $14.4325 a bushel and last traded at $14.425. The price touched $14.525 on Feb. 3, the highest since July 2008.

By Jae Hur and Rudy Ruitenberg – Feb 9, 2011 1:58 PM GMT+0100

Source: Bloomberg

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