Wheat Jumps After Citigroup Rescue Boosts Investor Confidence

By Tony C. Dreibus

Nov. 24 (Bloomberg) -- Wheat prices rose the most in almost four weeks on speculation that the U.S. government’s rescue of Citigroup Inc. will boost consumer confidence and improve demand for commodities.

The Reuters/Jefferies CRB Index of 19 raw materials rose as much as 5.4 percent, led by a surge in energy pries. The Standard & Poor’s 500 Index gained as much as 6.8 percent after Citigroup, the second-biggest U.S. bank, got a government package that shields the lender from losses on toxic assets and injects $20 billion of capital.

“We’ve got these outside markets dominating the trading action in the grains,” said Larry Glenn, an analyst at Frontier Ag in Quinter, Kansas. “If people want to get bullish and they see crude oil rally, some say ‘I want to own grain’ knowing that oil has been the price director for the grain markets. It’s kind of a mob mentality.”

Wheat futures for March delivery rose 38.75 cents, or 7.5 percent, to $5.5675 a bushel on the Chicago Board of Trade, the biggest gain since Oct. 29. The price still is down 59 percent from a record $13.495 on Feb. 27.

Demand for U.S. wheat may climb because of the sliding dollar. The greenback dropped as much as 2.6 percent today against a basket of six major currencies, giving importers more purchasing power for U.S. goods.

The U.S. Department of Agriculture said today it inspected about 22.3 million bushels of wheat for export in the week ended Nov. 20, up 46 percent from the prior week. Since June 1, inspections still have declined 14 percent to 589.5 million bushels from a year earlier, agency data showed.

‘Help Exports’

“What these countries are buying now is small quantities,” Glenn said. “That may pick up if they see some problems with the winter crop. We had a great crop last year, but will we have that two years in a row? Probably not. They may try to secure some inventory. That would help our exports.”

Global production may fall because of the drop in prices this year and high fertilizer costs, UniCredit Group said in a report today. Wheat may reach $10 a bushel as global production falls 7 percent to 627 million tons in 2009, UniCredit said.

Growers in the U.S., the biggest exporter of the grain, may have planted fewer winter plants this year because of lower prices, analysts have said.

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.