Wheat corn and rice have tripled and quadrupled in price over the past year, leading to fears that basic staples will no longer be affordable within weeks.
The cost of wheat has risen by the maximum allowed each day last week on the Minneapolis wheat exchange. The three major U.S. grain exchanges said in a coordinated statement late on Friday that they will raise the daily trading limit in wheat futures to 60 cents per bushel from 30 cents, starting with the February 11 trade date.
Price competition among the grains, stoked largely by federal supports for ethanol production, has bled generously into farmers pockets.
“Its a heyday in the heartland” gloated Investors Business Daily - focusing on the super-profits farmers are making. Both corn and soy prices are spiking, once again, to record levels. But short supplies have driven soy prices way beyond expectations, leaving farmers struggling with a lucrative dilemma.
The new wheat trading limits take effect with Sunday night’s electronic session that begins at 7 p.m. EST. “It is a very big deal,” Vic Lespinasse, a veteran grain market analyst for Illinois Grain, a brokerage house, told Reuters. “I do not know what is going to happen.”
In a report released Friday, the USDA predicted U.S. wheat inventories will total 272 million bushels by the end of May, the lowest in more than five decades and about 7 percent less than the USDA expected last month.
The limit on wheat prices will rise 50 percent, to 90 cents, on the next business day and another 50 percent on each subsequent day when two or more contracts in the same crop year close limit up.
The exchanges requested the changes on Friday and they were approved by government regulators the same day “to enable the markets to fulfill their price discovery and hedging functions,” the Commodity Futures Trading Commission said.
The emergency move came only one day after two exchanges — the Kansas City Board of Trade and the CME Group (CME.N: Quote, Profile, Research), parent of the Chicago Board of Trade — said they would raise trading limits to 40 cents from 30 cents on February 12. The Minneapolis Grain Exchange said separately it would remove the price limit on its spot March contract, starting February 25.
That did nothing to calm the markets, which on Friday closed locked up the 30-cent daily limit for the fifth straight day in a buying frenzy from both speculators and grain users.
For the past year, open outcry wheat traders have enjoyed one of the most lucrative trading periods in the Minneapolis exchange’s history. The cost of membership in the exchange continues to set records.Traders share stories about the surging market: the young trader who just bought an expensive condo; the broker who made six figures in a day……..
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