Oil hits record highs $100 plus - Wheat prices hitting UK retail food prices. Northern Wreck will be the ruin that wrecks Gordy's day

Oil price hits record high in US Press Association

The cost of light, sweet crude reached a record 100.40 in New York .....speculation that OPEC will cut output ... Tuesday saw a 4.5% surge in trading on the New York Mercantile Exchange (Nymex), following a 3% rise last week.

Wheat prices start to get a public airing in UK

Anna Hill On BBC Farming Today this morning spoke to a wheat farmer (6 mins into programme) who explained production costs rise, fuel - diesel was 35p a litre to 50 p litre , Fertilisers are £300 a tonne compared with £150 last year .Today it is costing £100 to produce a tonne of wheat.

She points out that world stocks are down from 20 weeks to 9 weeks.

Hugh Wiseman CamGrain farmers co-op (they have deal with Sainsbury's) talks of a crisis in world food supplies. World is short of wheat for humna consumption. Increases in wheat and grain yields seem to have reached a plateua . "We are down to the bare boards". Also referred how CAP reduction to zero for set aside would have to be continued despite concerns of the RSPB. See EU set aside zero subsidy policy produces a rapid response by English farmers.

Richard Clarke News Editor of the Grocer explained how their weekly "100" survey showed food prices across 100 typical food items had risen 8%. This included white bread up 33 % semi skimmed milk 21% and free range eggs 38%. He ascribed this to wheat costs, improved diets in the Far East, biofuels and road fuels, and plastics.

If interested in history See December 23, 2007 Wheat , corn, soya prices at record levels - demand exceeds world supply, fertiliser, farm and fuel costs rise - food costs jump and inflation follows and also September 16, 2007 Australian drought - poor spring rains - higher world wheat prices in prospect - low stocks and heavy demand and even earlier , November 01, 2006 World wheat shortages loom - prices soar - when it was suggested .."Get out the dough bowl and buy some yeast."

Now for the slightly better news. On MGEX Spring Wheat has fallen back from highs last week at US$18.15 a bushel down from US$18.60 and the spot month limit has fallen back to 60 cents and will be removed from Feb 25th.

Compare this with the graph Sunday Feb 18th when we asked ,had wheat reached its top ?

Should you bump into Lord King of the Bank of England & Northern Wreck or any of his double first Economists please pass on the news.

PS : Looks like the House of Lords are going to spend some time looking at the small print of the Granite Contract. See Tuesday, September 25, 2007 (the day the Directors cancelled the Interim divvy ) Northern Rock plc - Down’s Syndrome North East Association (UK) - Granite "securitisation" and the duties of the Directors of Northern Wreck- a puzzle and also Richard Murphy's useful exegisis of Granite.

Is Spring Wheat at the top of the market ?

The Market closed up 82 on Friday at MGEX. Kansas and Chicago are still operating at 60 cent daily limits whilst MGEX is using US$1.35 (which declines by 50% after 2 days).

Evidently demand is being affected by price ... but Iraq and Egypt have entered large contracts.

If these sort of levels maintain .. and crop conditions in the Southern Hemisphere suggests they will, it is early to make any judgements for the Northern Hemisphere.

It is difficult to see any reason why prices should not be sustained, short a massive global recession. Therefore in the next 12 - 24 months we can expect to see prices of grain related products, bread, pastas, flours up 15% to 20% and protein based on grain , poutry, pig, cattle rising higher.

Corn will be boosted by non food markets for fuel and we can expect US$5 a bushel plus for the next 2 seasons.

UPDATE Financial Times Monday

William Lapp, president of Advanced Economic Solutions, a Nebraska-based food consultancy, said the price surge was not a temporary hump but rather a structural change.
“We are not facing a short-term price blip...but a sustained move to a new and higher plateau for prices,” he added.

The American Bakers Association stopped short of asking for an export moratorium but pressed for curbs on foreign sales. Lee Sanders, ABA vice-president for government relations, said there was usually a surplus in the US wheat market equivalent to three months of US consumption.
“It is currently at a very low one-month level, which is extremely concerning,” she said.
Cereals traders said it was unlikely Washington would support export curtailments, but added that the call highlighted the tightness of the market.

CNN 60 year low of US wheat stocks Video "A Load of Crop" how ethanol subsidy for corn growers is distorting markets byreducing wheat acreage.

And by the Way ...

Platinum, soared to $2,030.60 at the New York Mercantile exchange, its 11th record high in 12 days. April futures, settled up $22.20 at $2,005.90 an ounce on the back of news on Wednesday that a power crisis in top producer South Africa that has curtailed mine production could persist for years.

Spot platinum hit a record of $2,205 an ounce and closed at $1,997.00/7.00 in New York.

April gold at the COMEX division of the NYMEX rose 60 cents to $910.80 an ounce. Spot gold closed in New York at $907.10/90, up from $906.70/7.50 on Wednesday.

In electronic ICE Futures, the U.S. May cocoa contract was up $57 at $2,545 a tonne in late trade, having peaked at $2,560, a level last seen in June 1984.

lUXOR 4 u FORUM .."We are currently experiencing in Luxor a flour shortage, and it is being rationed. Many people do not realise this, but supplies from America have been delayed. "