Wheat Rises as Weaker Dollar, Reduced Price May Boost Demand

By Tony C. Dreibus

July 24 (Bloomberg) -- Wheat rose, rebounding from a seven- week low, on speculation that a weaker dollar and lower prices for the commodity will boost overseas demand for U.S. grain.

The price has plunged 42 percent from a record in February as U.S. farmers harvest what the Department of Agriculture expects to be the biggest winter-wheat crop in a decade. The value of the dollar against a basket of six major currencies, including the euro and yen, has dropped 8.9 percent in the past year.

``Lower prices and a lower dollar make wheat an attractive buy,'' said Jon Marcus, president of Lakefront Futures and Options LLC in Chicago. ``Wheat is attractive for exports. I don't think anybody is jumping out of their skin to buy in over here in the U.S.''

Wheat for September delivery rose 4.5 cents, or 0.6 percent, to $7.8775 a bushel on the Chicago Board of Trade, after yesterday reaching $7.75, the lowest for a most-active contract since June 5. The grain still is up 23 percent in the past year, touching a record $13.495 on Feb. 27, after adverse weather curbed production in 2007.

The price also may have risen on speculation that livestock producers will step up purchases of the grain as a feed alternative to corn.

The price of corn rose 1.5 cents to $5.92, the first gain in six sessions in Chicago. A narrowing of the gap between the grains may prompt some cattle producers to add wheat to feed rations. Wheat futures are down 11 percent this year, while corn has gained 30 percent.

``The job of the market is to push wheat into the feed market, which it has done some,'' said Jerod Leman, a broker at Wellington Commodities in Carmel, Indiana. ``Wheat is a follower of corn. We're a little oversold in corn and wheat, and this bounce is technical in general.''

Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007, behind corn, soybeans and hay, government data show.

To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.