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Grains soar to new highs as importers pray for rain

CHICAGO: Grain prices roared to fresh highs on Friday on fears that continuing dry and cold weather in the heart of the American Farm Belt will drastically cut crop output at a time world grain stocks are perilously low.

Corn prices at the Chicago Board of Trade pushed through the $5 a bushel barrier for the first time ever, hitting a new high of $5.03 in the May futures contract in early trading.

At the Kansas City Board of Trade May wheat futures also soared to a record at $7.44, up 10 cents from Thursday and just below the record high for a wheat futures contract of $7.50 a bushel set at the Chicago Board of Trade on March 20.

The May wheat contract in Chicago was trading at $7.16-1/2 a bushel, up the daily trading limit.

Traders had been expecting the markets to take a breather Friday from the dizzying rise that has doubled wheat and corn prices in the last year as world stocks dwindle and drought battered the dormant U.S. winter wheat crop.

But weather forecasters continue to predict extremely poor weather for the nation's Farm Belt, triggering fresh buying.

"The bottom line is we do not expect any significant rain for the Kansas winter wheat crop during the next seven to 10 days," said Weather Services Corp. forecaster Joel Burgio.

Kansas, which produces nearly a quarter of all U.S. winter wheat, has been hit by drought since last fall.

Frigid temperatures and snowstorms blew into Minnesota Friday, and flooding from spring snow melt and cold continues to delay spring wheat planting in North Dakota, a key state.

Forecasters also said they also expect a surge of damaging high winds and a plunge in temperatures in battered wheat fields farther south in Kansas through Texas.

"There is a concern that temperatures will fall below freezing Monday and Tuesday, causing further problems to already stressed wheat," Burgio said.

Agriculture Secretary Dan Glickman, on a tour of Texas crop areas Friday, said he was concerned by low cattle prices as well as the drought-stricken winter wheat crop.

"This is now becoming a national and a worldwide problem in terms of what it's doing to the production of grains as well as what it's doing to the cattle industry (by) high grain prices and non-availability of feed," Glickman said.

"We still think this is going to be reasonably comfortable on food price inflation," Glickman told Reuters.

Some economists have said the higher grain prices will be absorbed by processors, manufacturers and retailers rather than passed on to consumers.

Overseas, grain importers were praying for rain for U.S. crops. Philippine flour firms suspended wheat purchases to avoid going out of business, and the European Union threatened to keep a brake on exports to help its own milling industry.

"If we buy wheat now we're going to commit suicide. The prices are out of control. If there is a break of $1 a bushel, maybe we can buy," a Philippines flour trader said.

South Korea's finance ministry said it was investigating possible price manipulation in the domestic grains industry amid fears that record prices could push up inflation.

In Taiwan, traders talked of high prices stretching ahead for months and made forward purchases until July.

Taiwan has bought more than 200,000 metric tons of expensive corn and soybeans this week but may buy more to lock in prices now, they said.

China is spending record sums to salvage its own crops from a drought affecting 17 million farmers across a fifth of its farmland, the Xinhua news agency said.

The European Union said it may again hike export taxes on wheat, less than a day after doing so to prevent panic buying to make up for the U.S. crop fears.

"We can't rule out anything. We have to adjust to the market situation," a spokesman quoted EU farm chief Franz Fischler as saying.

The EU on Thursday taxed flour exports for the first time in 20 years and raised a tax on wheat exports by 28 percent to stop worries over U.S. crops from spurring panic buying of its own low stockpiles of grain.-Reuter