Wheat Woes Worsen

The wheat market took off this week as global concerns over crop conditions worsened. This rally came as traders predicted that poor weather in Australia, Russia and the United States could drive winter wheat yields down.

Unlike corn and soybeans, which are grown over the summer, winter wheat is planted in the fall. Ideally, the wheat then germinates in a cool, moist autumn, only to be covered by a light blanket of snow for the winter. The wheat grows fast in the spring and is then harvested in the early summer and used to make baked goods.

In Kansas, the biggest U.S. producer of winter wheat, dry conditions are damaging the developing crop. Russian wheat is suffering from extremely cold temperatures which are causing a condition known as "winterkill." Australian wheat, which is ready for the Southern Hemisphere summer harvest, is being damaged by serious flooding.

The United States, Russia and Australia produce over 30% of the world's wheat, and the recent disruptions have caused wheat prices jump nearly a dollar per bushel. As of midday Friday, soft red winter wheat for December delivery in Chicago was trading at $7.35 per bushel, up 14% on the week.

Silver Market Explodes Higher

Silver futures rallied 9% this week, keying off of a booming Chinese economy, stronger global equity markets, and a lower US dollar. A red hot Purchasing Managers Index released in Beijing on Thursday showed that China's appetite for raw materials remains immense.

Actions taken by the European Central Bank to stem debt contagion fears caused the US dollar to weaken 1% against foreign currencies this week. Those factors, coupled with a rally in the global equities, supported silver's reputation as both a vital industrial component and a hedge against inflation.

Silver futures toyed with historic highs, with the March contract reaching $29.37 per ounce Friday morning, just 3 cents off of the 30-year high achieved on November 9.

As of Friday afternoon, silver for March delivery was trading at $29.24 per ounce.