No let up seen in world wheat price surge

By David Evans - Analysis

LONDON (Reuters) - World wheat markets, at their highest for more than a decade after bad weather hit crops, show no sign of retreat and are feeding fear of food price inflation.

Wheat prices have surged some 75 percent since April on both sides of the Atlantic after a dry northern hemisphere spring turned into a wet early summer, denting the outlook for crops, particularly in Europe.

World stockpiles are at their lowest in 25 years and there is strong demand for grains, driven partly by the biofuels revolution, providing all the ingredients for a sustained rally.

"The fundamentals have not changed, in fact they are getting worse. Stocks are short, we're seeing no rationing of demand and it's dry in the southern hemisphere," James Dunsterville of Geneva-based analysts AgriNews said.

"We are in an extremely tight market."

The International Grain Council has cut its estimate for 2007/08 world wheat output by 7 million tonnes to 607 million, citing deteriorating crop prospects in Canada and Europe.

Economists warn of grains pushing up food prices and fuelling inflation.

Analysts said German inflation data this week reflected price increases for dairy and grain products, and on Wednesday the GfK market research survey showed German consumer concerns over higher food bills was likely to dampen sentiment.