Wheat Surges On Midwest Rains, Pesticide Scare

By: Associated Press
By: Associated Press

NEW YORK (AP) -- Wheat prices shot up Wednesday after more rain doused parts of the flood-stricken Midwest and Kansas embargoed some winter wheat to test for pesticide residue. Corn and soybeans also rose.

Other commodities mostly traded lower, led by a big drop in crude oil prices. Gold, silver, copper and other energy futures all fell.

Heavy rain overnight and Wednesday over several Midwestern states could cause more flooding in a farming region that has struggled with too much water over the last two weeks, potentially hurting crops just as they were showing signs of improvement. Excess rainfall could lead to fungus on winter wheat crops being harvested now, said Elaine Kub, analyst with DTN in Omaha.

"That would be bullish for wheat because it raises quality concerns," Kub said.

Wheat for September delivery jumped 32 cents to $9.20 a bushel on the Chicago Board of Trade, after earlier rising to $9.11.

Prices also got a boost on news that the Kansas Department of Agriculture is embargoing some winter wheat so crops can be tested to make sure they don't have too much pesticide residue.The agency said it made the move after it found that some farmers improperly applied a certain toxic fungicide before harvest on more than 7,500 acres in 15 counties.

More Midwest rain also boosted corn and soybean prices, which surged to record levels last week after massive flooding wiped out crops and gutted farmland. Prices had fallen in recent days after warm, dry conditions helped boost crops just before the crucial summer growing period.

"What those fields need is to dry out to get oxygen to the roots, and any rain is very bad for that," Kub said.

Soybean prices for November delivery rose 8 cents to $14.99 a bushel on the CBOT, while December corn futures added 6.75 cents to $7.5425 a bushel.

Corn prices have surged about 80 percent in the past year as booming economies in India, China and other developing countries lift demand for animal feed and other corn-based food products. Growing U.S. demand for corn to make ethanol, an alternative fuel, has also boosted prices and drawn criticism that the United States is worsening food inflation through fuel-ethanol subsidies.

High corn and soybean prices could prompt countries, especially major grain importers Japan and South Korea, to switch to less expensive grains to feed livestock, said Vic Lespinasse of Grainanalyst.com.

"Countries do look for cheaper alternatives so you might see some importing more wheat or other grains," he said.

In energy markets, crude oil fell sharply Wednesday after the Energy Department said U.S. supplies of fuel and oil were larger than expected last week, suggest rocketing fuel costs were slowing demand for fuel.

Light, sweet crude for August delivery fell $4.16 to $132.84 on the New York Mercantile Exchange.

Other energy futures also fell Wednesday. July gasoline futures lost 10.66 cents to $3.3569 a gallon on the Nymex, while July heating oil dropped 9.72 cents to $3.7164 a gallon.

Crude's drop also pressured prices for precious metals, which are often bought as a hedge against inflation.

Gold for August delivery lost $10.40 to $881.20 an ounce on the Nymex.

July silver fell 53 cents to $16.58 an ounce, while, September copper lost 1.55 cents to $3.771 a pound.


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