Wheat Rises on Export Demand, Australian Production Concerns

Sept. 24 (Bloomberg) -- Wheat rose, extending a rally that sent prices to a record this month, as importers increased purchases and Australia's crop prospects dimmed.

Iraq bought 400,000 metric tons of U.S. hard-red winter wheat, the Iraqi Ministry of Trade said today. Global demand remains high even after prices doubled in the past year. Australia last week lowered its production estimate by 31 percent to 15.5 million tons as dry weather plagues the crop for a second straight year.

``Worldwide demand may be backing off a little, but it's still fairly strong,'' said Jerod Leman, a broker at Wellington Commodities in Carmel, Indiana. ``A lot of this demand is front- end loaded and will back off, but until it does, it will be hard to break these prices.''

Wheat futures for December delivery rose 3.75 cents, or 0.4 percent, to close at $8.7775 a bushel on the Chicago Board of Trade. The price is up 90 percent in the past six months and reached a record $9.1125 on Sept. 12 as world consumption is forecast to exceed output for the seventh time in eight years.

As of Sept. 13, U.S. exporters had sold more than twice as much wheat since June 1 as they had during the same period a year earlier, the Department of Agriculture said last week. Actual shipments were up 53 percent from a year earlier, the USDA said.

Weak Dollar

Buyers who need wheat may be taking advantage of a weak dollar, which is valued at its lowest level since September 1992 against six of the world's major currencies, including the euro and yen.

``Usually we've been one of the last places people come to for wheat, but the dollar continues to go in the tank,'' Leman said. ``It has to do with need. Demand for all commodities continues to be strong.''

Adverse weather has hurt crops in the top three exporting countries this year as a freeze followed by excessive rain damaged plants in the U.S., the largest shipper of the grain, and drought plagued wheat in Canada and Australia. The USDA forecasts both Canada and Australia will export 14 million metric tons of wheat during the marketing year that ends May 31.

Global stockpiles by the end of the marketing year are forecast to fall to 112.4 million tons, the lowest in 26 years, the USDA said.

``The market has rallied in an effort to ration the tight supply of wheat,'' Brian Hoops, president of Midwest Market Solutions Inc. in Yankton, South Dakota, wrote in a report. ``However, demand has remained strong even as prices have rallied, leaving wheat with a supply-and-demand led bull market.''

Wheat, valued at $7.7 billion in 2006, was the fourth- biggest U.S. crop, behind corn, soybeans and hay, according to U.S. government data.