Custom cutter Jeff Goebel, from Gettysburg, South Dakota, harvests wheat in a field on June 18. U.S. wheat prices climbed to US$10 last Tuesday. - ap

Global wheat prices surged more than three per cent on Monday, with Chicago Board of Trade wheat futures breaking US$10 a bushel for the first time, on dwindling world supplies, a lack of sellers and a push from financial investors.

Wheat prices have nearly doubled since the start of the year, fanning fears about a food-price-led inflation at a time the global economy could slow, and industry officials said crop worries and strong global demand would keep prices firm until a clearer picture emerged early next year about U.S. plantings.

U.S. wheat, measured from the start of the decade, is now ahead of U.S. crude oil and industrial metal copper with all three commodities, on a monthly-average basis, having risen more than three-and-a-half-fold since January 2000.

The bellwether Chicago Board of Trade March wheat contract rose by the 30-cent-per-bushel daily limit overnight to $10.09 per bushel. It rose 21 cents to US$10.01 during intra-day trading.

In Europe, milling wheat futures set new two-and-a-half-month highs across the board in early trade. Benchmark March was up euro6.5 by 1200 GMT at euro267.50 after hitting euro270.50 earlier.

Other global agricultural markets including corn, soybeans and rapeseed were also sharply higher.

"We think agricultural commodity prices are going to continue rising, depending on the climate and the state of the harvests," said Moncef Kaabi, head of commodities research at French investment bank Natixis.

Cold-weather damage

"This will have an impact on inflation, with any 10 per cent increase in spot food prices translating into a 0.3 point rise in inflation in the Eurozone."

With world wheat stocks seen dwindling to 30-year lows by the end of the 2007/08 marketing year and India and Pakistan scouting the market for large volumes of wheat, traders said there was very little chance of a big correction in prices.

On the supply side, Argentina's Agriculture Secretariat halted wheat exports in early December for several days to assess cold-weather damage and Russia is expected to slap a ban on wheat exports next month.

In Europe, the fall of the euro against the dollar has also been supportive as it makes European grain more attractive on world markets.

However, grain analysts stressed many of the fundamental factors such low world wheat stocks and strong export demand had been in the market for months.

"The market is caught short and there are no sellers. I don't believe (the rise) is based on fundamentals at all," James Dunsterville, analyst at Geneva-based Agrinews, said.

Rodolphe Roche, a commodities fund manager at Schroders in London, said a rise of CBOT wheat to $10 was widely expected and that the delay in reaction was notably due to the fact that grains markets were more reactive and provident.

Traders and analysts stressed that the surge in wheat prices had mainly hit current crop futures and that U.S. prices for the upcoming 2008/2009 harvest were heading in a different direction.

In Chicago new crop wheat futures were down between 9.75 cents and 14 cents a bushel.

In Europe, milling wheat futures for delivery from August onwards were higher, but by not nearly as great an extent as contracts for the current season.

- Reuters