July 28, 2010

CBOT wheat up on fears of Russian export curbs

US wheat futures traded higher on Tuesday (Jul 27) after a two-day slide, lifted by fears of potential Black Sea wheat export curbs after some analysts cut their estimates of Russian and Ukrainian grain production.

Russia's agriculture ministry denied the speculation about export restrictions, cooling early market strength.

At the Chicago Board of Trade, the spot September wheat contract was up four cents at US$5.93-1/2 per bushel as of 11:25 a.m. CDT (1625 GMT).

The contract jumped to an early session high of US$6.04 but stayed below last week's 13-month high of US$6.10, then retreated and briefly traded lower. CBOT corn was choppy, struggling to rebound after a three-day sell-off. Soy was mixed as well, anchored as US crop weather remained generally good.

The CBOT wheat market, which has climbed nearly 24% in July, held the early spotlight as traders mulled the likelihood of export restrictions from the Black Sea region.

Earlier on Tuesday, Russia's Deputy Economy Minister Andrei Klepach said the country may harvest less than 80 million tonnes of grain this year, against a previous official grain crop forecast of 80 million to 85 million tonnes.

Meanwhile, SovEcon agricultural analysts said the drought might cut the Russian grain production even further - to less than 70 million tonnes.

Leading analyst UkrAgroConsult said Ukraine's government may limit food grain exports in the second half of the 2010/11 season to avoid domestic shortages in the wake of crop damage.

The lowered production forecasts increase the possibility that the Russian government might intervene, if the pace of exports continues to be brisk, said Shawn McCambridge, analyst with Prudential Bache Commodities in Chicago.

"Just like in 2008, they are going to protect their domestic market first, as they should," he said.