Wheat falls as recession curbs demand, investors shift to gold

Wheat fell, capping the fourth straight weekly decline, as the slumping global economy erodes grain demand and investors shift from agricultural commodities to haven assets, including gold.

Gold topped $1,000 an ounce yesterday for the first time since March. This week, the Dow Jones-AIG Agriculture Index dropped 5.6 per cent, the most in two months. Wheat has fallen 49 per cent in the past year as global demand for food staples wanes.

“Investors are running back to the safe haven of gold and silver,” said Mike Zuzolo, the chief analyst at Risk Management Commodities in Lafayette, Indiana. “The stimulus will take three or four months before we see a net effect on aggregate demand.”

Wheat futures for May delivery fell 0.5 cent to $5.305 a bushel on the Chicago Board of Trade. Earlier, the price touched $5.15, the lowest for a most-active contract since December 16. The grain dropped 0.9 per cent this week and is down 62 per cent from a record $13.495 on February 27, 2008.

US exporters sold 433,457 tonnes of wheat in the week ended February 12, up 5.3 per cent from the prior week, the Department of Agriculture said in a report today. Still, overseas buyers have committed to purchase 25 per cent less of the grain since June 1, USDA data show.

Pessimism on the economy is deepening, and sales of equities and most commodities are accelerating, Zuzolo said. “For about three months, investors have seen stocks and commodities as risky assets,” he said. “Investors have tried to lift the equities and industrial-based commodities. But if they see them hit lows, they run back to the safe havens, so we keep playing this game of back and forth. This game is winding down. They have less to put into risky assets.”

Wheat is the fourth-biggest US crop, valued at $16.6 billion in 2008, behind corn, soybeans and hay, government data show.

India’s wheat, rice reserves exceed buffer norms
India, the world’s second-biggest wheat and rice grower, held more grain than required to meet shortages after record purchases from farmers swelled granaries.

State warehouses had 17.57 million tonnes of rice on January 1, compared with a minimum requirement of about 11.8 million tonnes, junior food minister Akhilesh Prasad Singh informed the parliament.

The government held 18.2 million tonnes of wheat on January 1, compared with a buffer stock 8.2 million tonnes, he said. India bought 22.02 million tonnes of rice and 22.68 million tonnes of wheat from farmers by February 16, he said.

The nation’s so-called central pool held 20.1 million tonnes of rice and 16.74 million tonnes of wheat on February 1.