US wheat exports surge

Demand for US wheat is soaring, despite the highest prices in 11 years, amid tight global supplies and concern that severe weather will continue to cut wheat quality and yields in Europe, analysts and wheat traders said.

"It has brought end-users into the market to aggressively extend coverage, to get this volume on the books just in case the problems in Europe continue to escalate," said Shawn McCambridge, senior grain analyst with Prudential Financial.

Passing up the opportunity to buy wheat now "could prove to be extremely expensive if we have similar problems in Europe that we had in the Plains," he said. In parts US hard red winter wheat belt, the spring freeze followed by persistent rain and flooding at harvest cut quality and yields in spots.

US wheat export sales last week reached the highest level in years as some regular customers have been buying more wheat than normal, fearing prices could rise further, analysts said.

Some new or rarely seen customers also have bought US wheat due to supply shortages in their regular markets, they said.

The US Agriculture Department said 2,077,500 tonnes of US wheat sold for export last week, well above estimates for 950,000 to 1,100,000 tonnes. That total included 428,200 tonnes to Egypt, 135,800 tonnes to Italy, and 106,000 tonnes to Bangladesh, which hasn't bought US wheat since 1999.

USDA also reported heavy wheat export sales to unknown destinations, indicating that some smaller amounts have been sold to buyers filling immediate needs due to supply shortages in their normal markets, analysts said.

The shrinking French crop has prompted its normal customers to seek some wheat from the United States.

USDA said Algeria, which usually buys French wheat due to lower shipping costs, bought 32,500 tonnes of US wheat last week. In addition, private exporters reported on Thursday that Algeria bought 100,000 tonnes of US hard red winter wheat for the 2007/08 marketing year.

A US dollar exchange rate near 15-year lows and the lack of suppliers that can currently offer large quantities of freshly harvested grain have added to the appeal of US wheat, analysts said.