February 2, 2012
US wheat surges to 4.5 month peak amid Russia's worry
US wheat opens high on February 1, following a second straight daily advance, nearly 2% to a 4.5 month peak as cold snapped Europe, threatening the winter wheat crop with Russia likely to curb exports.
Corn and soy also rose for the second straight trading session, buoyed along with wheat by a weak dollar, stronger-than-expected economic data from China and Germany and optimism that Greece's debt crisis will be resolved.
Corn rose more than 1% to a three-week peak. Soy also gained more than 1% amid firm US cash soy and news China, the world's largest soy importer, bought a couple cargoes of US soy.
The USDA reported a sale of 120,000 tonnes of US soy to China for delivery this marketing year and also reported a sale of 120,000 tonnes of US soft red winter wheat to an unknown destination, also for delivery this year.
At 9.50 a.m, CST (1550 GMT), CBOT March wheat was up US$10-1/4 cents per bushel at US$6.76-1/4, March corn was up US$6-1/4 at US$6.45-1/4 and March soy were up US$14-3/4 at US$12.13-3/4.
Traders and analysts agreed that the wheat markets traded on the Chicago Board of Trade and Paris Euronext futures were the market leaders for the second day this week.
European benchmark milling wheat futures touched a seven-month high on the weather worries.
Paris March wheat was 1.28% higher at EUR218.25 (US$287.88) a tonne or up Eur2.75 (US$3.62) after hitting Eur221.50 (US$292.16) a tonne earlier in the session, a price last seen in June 2011.
A fierce cold snap engulfed Russia, Ukraine and western European grain producers including France, Germany and Poland and there were fears deep frosts could damage harvests.
"A sharp freeze across Europe and the Ukraine, further talk of large damage to Ukraine winter wheat yields, lack of snow coverage, the question mark over Russian exports and logistics all continue to dominate market views across Europe and the Black Sea," said Jaime-Nolan Miralles of INTL FC Stonnese.
Bitter cold temperatures this week probably harmed up to 15% of Russia's Black Sea wheat crop and 20% of the winter barley was likely harmed, said Don Keeney, meteorologist for MDA EarthSat Weather. "There is a snowcover in most of the region but it is too thin in southeast Ukraine and southwest Russia. There should be at least 10 centimetres of snow and it isn't that deep in those areas," Keeney said.
Keeney said a bigger problem for the winter crops in the Black Sea were the dry conditions when the crops were planted in the fall. "Winterkill is a problem but a bigger problem is that 30 to 40% of the crops didn't germinate," Keeney said.
"The cold weather in east and west Europe is the main driving factor in the market today," said Rabobank analyst Erin FitzPatrick. "There is concern about weather risk to crops in Ukraine, Russia and in parts of west Europe including France.
Ukraine's state weather forecaster said on Wednesday (Feb 1) the country's winter grains harvest could fall by 42-58% to 10-14 million tonnes due to poor weather during sowing and winter damage.
In the past week, world wheat markets have rallied not only because of the weather issues but on expectations that Russia will put the brakes on exports.
"Prices have gone up because Russia has said that there could be restrictions on wheat exports," said Lynette Tan, analyst with Phillip Futures in Singapore. "Any curb by Russia will have strong implications on the trade and, therefore, I see a further upside to wheat."
On Tuesday, Russia's Deputy Prime Minister Viktor Zubkov told Reuters the government would determine on Thursday how much grain could be exported this crop year before it considers imposing a protective export duty to preserve domestic supplies.
