In the United States, the futures price on December wheat reached its highest levels in a decade, while in Paris, the price of flour wheat is close to the autumn 2003 records. In London, wheat for animal feed is at its highest prices since May 2004.

Poor rainfalls are blamed for affecting wheat harvests worldwide except in China. The London-based International Grains Council said world wheat production would amount to 588 million tonnes in the 2006-07 cycle, a shortfall of 30 million tonnes (4.8 percent) against the previous cycle and would not be enough to meet expected demand of 607 million tonnes.

This means that wheat reserves will have to be used, taking them to their lowest levels in 25 years.

According to the IGC report, published at the end of September, the figures do not take into account alarming news from Australia where wheat production appears set to suffer a 50 percent shortfall because of low rainfall.

Australia will harvest between 12 to 15 million tonnes instead of the 25 million harvested last year. Australia usually exports about 70 percent of its production, principally to Asian countries where it competes with US wheat. This sidelining of one of its main competitors has helped strengthen US wheat prices.

In Europe, tension rose after Ukraine announced it was slowing its wheat exports in a bid to protect its domestic market from a sharp rise in prices by introducing quotas.

Ukraine's traditional clients have thus had to turn to other sources nearby, notably in Europe.

Ukrainian wheat has not only suffered from the water shortage but also from its poor reputation as being low quality due to severe winter frosts, hot summers and to top it all this year, an invasion of grasshoppers.

India, which demands high quality from its wheat suppliers, refused a cargo of Ukrainian wheat, turning instead towards European wheat which, like its US counterpart, is benefitting from the difficulties of its competitors.

Despite a drop in production of more than 9.0 million tonnes, the United States hopes to export 24.5 million tones of wheat against 27.5 million last year but the European Union hopes to better its export figure of 10 million tonnes last year by exporting 12 million this year.

Europeans also seem well on the way to meeting their objectives because in three months of trading they have already sold a million tonnes more than they had at this time last year.

Major importers such as Egypt, Iraq, Algeria or Brazil have put their purchase orders forward to try and beat the price rises.

Faced with this demand, producers are playing coy and raising the stakes. "They are the ones who are dictating the prices, particularly because there is nothing in view which might indicate that prices will come down," said a French trader.

The price of other grains, notably maize, has risen in the wake of wheat. Because of the development of biofuels, in particular in the United States, the demand for maize is likely to grow expotentially in the next few years.

"It will then be the turn of maize to pull the price of wheat up," commented a trader.

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