Wheat prices soared 8% in Chicago, helping lift London wheat to a fresh two-year high, after a US grand slam in Egypt's latest tender fuelled expectations for demand for the grain just as weather concerns stoked concerns for supplies.

Chicago's December wheat contract hit a three-week high of $7.02 ¼ a bushel at one stage, with the better-traded March lot jumping 7.9% to $7.45 a bushel.

The jump was attributed to a series of factors, including the poor condition of the US hard red winter wheat crop entering dormancy, the rains which have left eastern Australian farmers up to five weeks behind with harvest.

"We have heard that 5m-10m tonnes of Australian wheat may be downgraded to feed," or potentially more than 40% of the crop, London trader told Agrimoney.com.

"Usually there are minimal amounts."

'Real combo' 

Meanwhile cold weather in Russia has raised concerns over crops heading into the winter in a relatively low level of maturity, thanks to drought-delayed plantings, and the low quality of Canada's crop means feed wheat supplies  are to be the highest in six years, according to the Canadian Wheat Board.

The dollar eased 0.7%, making dollar denominated exports more competitive.

"It's a real combo of things," said Mike Mawdsley at US broker Market 1, noting also reports that India, which has deep wheat inventories, may not allow exports in the near term.

'Tipping point' 

However, the rally hit its high after Egypt, the world's top wheat buyer, announced that, for a second tender running, all the winning offers were of US grain.

"That was a surprise, that the US is adding so much in exports at this point," Mr Mawdsley said.

While many analysts have expected America to take over trade with buyers such as Egypt, as the European Union runs out of exportable supplies, the switch had not been expected to take place until later in 2010-11.

But Rabobank warned last week that that previous Egyptian grain tender, in November, was a "tipping point" in seeing EU grain outcompeted, despite the lower transport costs involved in shipping through the Mediterranean rather than across the Atlantic as well.

"The EU must dramatically slow their export pace or risk becoming a large wheat importer towards the end of their marketing year," the bank said.

Two-year high

Details of the tender showed that Egypt bought soft wheat at less than $294 a tonne from the US, a price which, even accounting for the extra $10 a tonne or so shipping costs, undercut the cheapest French grain, offered at $306.48 a tonne.

Nonetheless, the strength of the US rally pulled wheat higher too in Paris, where the January contract adding 2.2% to E229.00 a tonne.

London's January contract kept in step to close at £183.25 a tonne, its highest finish since April 2008, and getting not too far from of its all-time high of £197.50 a tonne, set in September 20078.

London wheat is being supported by the particularly strong levels of UK exports, which over the summer ran near-double their pace of a year before, raising fears of the country facing a dearth of domestic supplies.