Wheat prices jumped in both Europe and the US, hitting their highest level in Paris for more than two years, as corn's surge above $5 a bushel upped the stakes in the battle for acres for next year's crops.

Chicago wheat for December delivery jumped 2.7% to $7.39 a bushel in early deals on Friday, the third-highest peak for a near-term lot since the start of the grain's rally more than two months ago.

Paris's November contract soared 4.0% to E238.00 a tonne, the best for a spot contract since April 2008, before coming up against profit-taking. London feed wheat for the same month jumped 2.3% to ё166.00 a tonne.

The rises were attributed by traders largely to a jump in the price of Chicago corn, which jumped above $5 a bushel for the first time in nearly two years, soaring 3% to hit $5.11 ╬ a bushel at one point.

The fortunes of the crops are in part tied by their interchangeability in some uses, such as livestock feed, meaning that prices of one of the grains tends to have some knock-on effect on the other.

Fight for area

Nonetheless, Rabobank analysts also highlighted that "a major battle for acres is building in the US".

Wheat prices were offering US growers the "second highest pre-planting prices on record" for soft red winter wheat, the type traded in Chicago, and the hard red winter variety, as traded in Kansas, meaning that the grain should recover some of the 5.5m acres lost to other crops in the last two seasons.

"However, with the US corn balance sheet forecast to reach one of its tightest levels on record, corn prices are going to have to ensure additional plantings next season," the bank said.

Indeed, wheat is looking a less attractive alternative than it was at its August peak, when it was worth nearly twice as much as corn, per bushel. The premium has halved, to 44%.

Wheat vs barley vs rapeseed

In Europe, wheat is fighting for farmers' attention with barley - whose stocks in the region are set to plunge by 70% to their lowest in at least a decade, according to US estimates - and rapeseed, of which there is a global shortage.

"This is a major turnaround from last year, when prices for major EU crop had fallen to √ or even below √ the cost of production, and farmers were withdrawing marginal land," Rabobank said.

"Wheat prices need to encourage additional plantings for next season' crop, particularly if the market expects only a limited [production] recovery in Russia."

The bank concluded that there were "a number of significant risks", including disappointing Chinese or US corn yields, or southern hemisphere wheat crops, which "threaten to push grain prices higher over coming months".

Stops started

Observers attributed Friday's jump in corn prices, at the centre of the crop rally, to expectations of further cuts in official estimates for US production following a disappointing start to the harvest.

"Clearly the market is building expectations that the US Department of Agriculture will have to lower its estimate for domestic production," a London analyst said.

Rabobank pegged a cut of 1.5 bushels per acre, to 161 bushels per acre, in the USDA's yield estimate, with Goldman Sachs, in a separate report, forecasting a 160-bushels-per-acre figure.

Once above the $5-a-bushel hurdle, the grain was likely to have triggered a barrage of automatic buy orders placed on expectations of easier price gains ahead, a UK trader said.

"There are bound to have been a stack of buy stops placed just above $5, which sent the price up further," one London trader said.




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