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Column | Futures File

Walt Breitinger: Staff of life lifted by shrinking supplies, Where's the beef?

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December wheat futures shot up to a new contract high on Thursday at $8.43 per bushel. Among the reasons were Australian and Canadian weather issues, including a washout of rail service to Vancouver and general inflationary concerns. In addition, record low world exporter stockpiles led to higher prices in Russia, and Egypt faced shortages just as the International Grains Council cut their forecast for global wheat production.

The United States is a major wheat-producing country, exceeded only by China, the European Union, and India. Wheat ranks third among U.S. field crops in planted acreage and gross farm receipts, behind corn and soybeans. It’s the top grain produced for human consumption in America, grown in over 40 states. Kansas and North Dakota are typically the largest producers.

Wheat is a type of grass that humans have been eating since the dawn of civilization. George Washington was one of the first Americans to plant wheat back in the late 1700s. Chicago wheat for December delivery traded at $8.21 per bushel midday Friday. December corn brought $5.70, while January beans traded at $12.62.

Where’s the Beef? 

Meatpackers sold record amounts of beef to China last week, while Japan was a big buyer too. China typically buys from Brazil but has banned Brazilian beef due to detection of mad cow disease. So now China’s demand has shifted to the U.S. The USDA planned to release a Cattle on Feed report after the close on Friday, which should contain hints about the future supply of cattle. Trade estimates were expected to be about 2% more cattle to be in U.S. feedlots compared to this time last year. December cattle closed near $1.3350 per hundred pounds on Friday, up roughly one and a half cents on the week.

Inflation is World-Wide Worry

Recent surges in inflation are by no means unique to the U.S.; Great Britain and Japan this week both announced record price increases, with the U.K.’s October consumer price index jumping 4.2%, the largest increase in ten years. Fuel and energy costs were a part of the sharp rise. Japan’s wholesale inflation rate was at a 40 year high in October, and retail consumer prices are also heating up. Last week the news broke that the U.S. Consumer Price Index hit 6.2% in October. February gold traded at $1,852 per ounce midday Friday.

Opinions are solely the writer’s. Walt Breitinger is a commodity futures broker in Valparaiso, Ind.  He can be reached at 800-411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.

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