Wheat prices touched fresh highs in the first trading session of 2011, breaking above $9 a bushel in Minneapolis, amid fears over the impact of heavy rains in Australia and plunging temperatures in the US.
Flooding centred on the Australian state of Queensland, which has affected an area bigger than France and Germany combined and could leave many areas under water for weeks, added a further blow to Australia's hopes for filling the void left in world wheat supplies by poor Black Sea output.
"Although the impact on harvest should be limited, the issue now is more one of logistics, with anticipated disruptions along [Australia's] east coast," Jamie Nolan, at FCStone's Dublin office, said.
The focus of Australia's wheat production this season on the east coast, which has a congested transport network, from the west coast, which is normally the centre of exports, had already raised concerns over the country's ability logistically to tap import demand switched from Russia.
Furthermore, rains late last year have left potentially half of Australia's wheat crop of 24m-25m tonnes on course to be downgraded from milling grade, mostly to feed, analysts believe.
"One can see clearly why prices have retained and enhanced the pace and magnitude of their bull run this last month," Mr Nolan said.
'Extreme stress'
In America, US Commodities attributed strong wheat prices to cold temperatures, as low as minus 25 degrees Celsius, in hard red winter wheat areas already dogged by drought.
Indeed, lack of precipitation has denied many areas the snow cover needed to protect winter wheat seedlings from deep frost.
"Wheat that did not have snow cover was under extreme stress," the broker said.
Temperatures could reach minus 25 degrees Celsius in the northern Plains tonight, with those in the southern plains hitting around minus 14-15 degrees, Meteorlogix said.
Day highs
In Chicago, the world's benchmark wheat market, the March contract soared 3.9% to $8.25 a bushel at one point, a five-month high for a spot contract.
In Kansas, which trades hard red winter wheat, the March lot touched a two-year high of $8.81 ?a bushel, while Minneapolis spring wheat for March achieving a similar feat by hitting $9.08 a bushel.
In Europe, Paris wheat for January also hit a two-year top, of E258.25 a tonne, up 2.3% on the day. London markets were closed for a UK holiday.
Chicago vs Paris
Mr Nolan noted that while Paris grain was trading at a E34-a-tonne premium to Chicago, the gap may need to increase given the relative scarcity of supplies in the European Union, where exports have set off in 2010-11 at an unsustainable pace.
"We will need to see this spread continue to move higher, if we are to see global demand for quality wheat shift at a faster pace from Europe to the US," he said.
However, prices closed well below their highs on Monday, amid a wave of late selling in holiday-thinned crop markets.
"The general attitude going into today, was if it moves something or you can eat it, we want to buy it. But that buying enthusiasm evaporated quickly," Darrell Holaday at US broker Country Futures said.
