CHICAGO (Dow Jones)--Widespread protests in Egypt Tuesday renewed concerns about rising food prices after high costs contributed to riots in Tunisia and Jordan.
Thousands of Egyptians descended on downtown Cairo's main square in the country's largest anti-regime protest in recent memory. The energy and size of the demonstrations were evidence that Egyptians--long frustrated by mounting economic woes and a seemingly unmovable leadership--were capable of uniting to
challenge the 30-year rule of President Hosni Mubarak.
The protests were seen as the latest example of unrest sparked partly by surging food costs and indicated demand for wheat, a food staple, should remain strong, U.S. grain traders said. Buyers in North Africa and the Middle East have boosted purchases of U.S. wheat following the recent ouster of long-standing Tunisian president Zine El Abidine Ben Ali.
"When you're talking about food riots, they're not pork-chop riots. They're grain riots," said John Kleist, broker and analyst at Allendale, an Illinois-based commodities brokerage.
Soft red winter wheat for March delivery, the most-active contract, closed up 3 cents, or 0.4%, at a 29-month high of $8.38 1/4 a bushel at the Chicago Board of Trade. The market rebounded and bucked a weaker trend in commodities after sinking as low as $8.20 3/4.
Wheat futures have almost doubled since this summer, when Russia banned grain exports due to a devastating drought. Buyers around the world have been scrambling to secure supplies of hard red wheat that can be milled into flour after rains damaged crops in Australia and Canada, leaving farmers with large supplies of wheat that is suitable for feeding livestock, but not human consumption. The U.S. is the world's top wheat exporter and one of the last remaining sources of high-quality supplies.
Algeria has already bought a million tons of wheat from the world market this month and is looking to buy more, traders said. Turkey and Jordan bought U.S. wheat last week, while Tunisia's state grains agency snapped up supplies following recent unrest there.
Traders expect Egypt, the world's top wheat importer, to issue a tender to buy wheat this week, and secure some from the U.S.
Egypt is typically known as a price-conscious buyer and often issues tenders when prices drop. It has not issued a tender since Jan. 8.
"They have more urgency because of the riots," Kleist said about Egypt's grain buyers.
The U.S. Department of Agriculture will give traders their next update on
wheat demand when it issues weekly export sales data Thursday. Export sales should be strong at about 800,000 to 1.1 million tons for the week ended Jan. 20 after sales of 1.1 million tons the previous week beat traders' expectations, Citigroup grains analyst Terry Reilly said.
"The market just remains underpinned from export demand from the Northern African countries and the Middle East," he said. Hard red winter wheat for March delivery rose 9 1/2 cents, or 1%, to $9.17 1/2 a bushel at the Kansas City Board of Trade. Hard red spring wheat for March delivery advanced 5 3/4 cents, or 0.6%, to $9.56 a bushel at the Minneapolis Grain Exchange.
Rice Futures
U.S. rice futures closed lower in a turnaround from 13-month highs. Futures prices pulled back after rallying recently on concerns that U.S. farmers will slash rice plantings this spring due to weak prices.
CBOT March rice ended down 39 1/2 cents, or 2.6%, at $14.75 per
hundredweight.
Market participants booked profits after prices Monday closed at their
highest level since December 2009, traders said. Spillover pressure from losses in other commodities, including corn and soybeans, added pressure.
