Wheat Prices Surge as African and Mideast Unrest Make Speculators Gone

Wheat commodity as grain, has prices surged as North African and Middle East nations bought more shipments to damp a surge in domestic prices that helped spark the protests from Morocco to Bahrain. Speculators including hedge funds last week cut their bets on higher wheat prices by 20 percent, U.S. Commodity Futures Trading Commission data show.

Wheat for May delivery fell 9 cents, or 1.1 percent, to $7.8925 a bushel on the Chicago Board of Trade, as of 9:26 a.m. in London. Corn for May delivery retreated 5.75 cents, or 0.8 percent, to $6.965 a bushel and soybeans dropped 16.75 cents, or 1.3 percent, to $13.1475 a bushel.

North Africa and Middle East countries are expected to buy 39.3 million metric tons of wheat in the 2010-11 marketing year, accounting for 32 percent of world purchases, U.S. Department of Agriculture data show.

Wheat extended a collapse and corn and soybeans also fell as traders speculated that a jump in energy costs caused by protests across North Africa and the Middle East will curb growth and demand for grains.

Riots already ousted leaders in Egypt, the world?s biggest wheat importer, and in Tunisia, and opposition groups have seized control of eastern cities in Libya. While wheat traded in Chicago dropped 10 percent since Feb. 18, crude oil traded in New York jumped 18 percent.

?Everyone has been bullish corn and wheat for an extended period,? Michael Pitts, commodity sales director at National Australia Bank Ltd., said by phone from Sydney today. The unrest in North Africa and the Middle East meant ?they really ignored some positive fundamentals and sold off.?

The Standard & Poor?s GSCI Agriculture Index of futures doubled since July and the United Nations says global food prices reached a record last month. The U.S., the biggest exporter, is forecasting a 49 percent jump in its shipments in the 12 months ending in June, the most in 18 years.

Hedge fund managers and other speculators held a net-long position, or bets on higher prices, of 34,193 contracts by Feb. 15. A week earlier, they held 42,635 contracts, the most since 1997, according to data from the CFTC.

?It?s not surprising to see the declines because of increasing risk aversion in the market,? said Eugen Weinberg, Frankfurt-based head of commodity research with Commerzbank AG. ?Gold is inching higher and oil is definitely experiencing some inflows.?