US wheat futures started 2011 with a new five-month high on Monday as floods in Australia hampered grain shipments and reinforced the global supply concerns that had sent grain markets surging last year. In 2010 Chicago wheat posted its first annual gain in three years by rising 47 percent, and many analysts expect grains to test all-time highs this year because of weather worries, robust demand and investor interest.
Soybean and corn futures also recorded hefty gains last year on the back of tightening supply and Chinese-driven demand, although they eased on Monday under pressure from a firm dollar. Chicago Board of Trade March wheat was up 1.23 percent at $8.04 a bushel by 1131 GMT, after earlier climbing to $8.10-3/4, a new high for front-month prices since August 6.
"There is supporting news from Australia as it seems that Australia is not going to recover from floods soon," said Ker Chung Yang, an investment analyst at Phillip Futures in Singapore. "They are one of the major wheat exporting countries and news from there is driving the market."
Floods in Australia's Queensland could disrupt grain supplies for weeks, top grains handler GrainCorp Ltd said on Monday, further delaying the transportation to market of the country's waterlogged wheat crop. Even ahead of the latest deluge, Australia's wettest spring on record had damaged the crop quality in the world's fourth largest wheat exporter, contributing to highs on global wheat markets at the end of 2010.
Last year's gains for spot prices allowed Chicago wheat to erase a 42 percent combined loss for 2008 and 2009, when ample global supplies weighed on prices and pulled them back from all-time highs seen in 2007/08. European milling wheat futures also started the year on a firm footing, setting the latest in a series of contract highs as the market stayed at levels last seen in March 2008.
January milling wheat rose 0.59 percent to 254.00 euros a tonne after reaching earlier a new high of 255.50 euros, while the more active March reached a fresh contract high of 252.00 euros. "The market remains on a bullish trend," a European futures broker said. "There is still concern about Australia and Argentina." Operators said movements could also be driven at the start of the year by investment flows linked to index reweighting, as well as a closely watched grains supply/demand report from the US government on January 12.
ARGENTINE CORN YIELDS AT RISK Dry conditions in Argentina are threatening to stress corn and soybean crops and could add to tensions in world supply after a severe drought in Russia, the rains in Australia and ongoing dryness in US wheat-growing areas.
Parched, hot conditions caused by the La Nina weather phenomenon are threatening corn yields in Argentina, the world's No 2 exporter of the cereal, and rains are urgently needed, the government said on Friday. The situation in Argentina underpinned corn and soy futures, which had risen 52 percent and 34 percent respectively in 2010, but a stronger dollar pushed prices down a touch on Monday.
Corn for March delivery lost 0.2 percent to $6.27-3/4 a bushel, and soybeans for January eased 0.20 percent to trade at $13.91. The dollar index, which measures the strength of the greenback against a basket of currencies, was up 0.3 percent. A stronger dollar makes US commodities less competitive in the international market.