July 29, 2010

 

CBOT wheat reaches 13-month high

 

 

Wheat prices rose to a 13-month high on Wednesday (Jul 28) amid concerns that Russian grain exports may be curbed next season after severe drought hit many key grain regions, traders said.

 

The spike in wheat prices also led corn and soy sharply higher, despite mostly benign conditions for developing US crops.

 

"Right now, the market is caught up in the euphoria of the production losses and the possibility of seeing more business shift over to traditional exporters such as the US," said Shawn McCambridge, analyst at Prudential Bache Commodities.

 

Drought may nearly halve grain exports by Russia to 12 million tonnes in the 2010/11 crop year started on July 1 from 22 million in 2009/10, SovEcon agricultural analysts said. This includes an export forecast for 11 million tonnes of wheat.

 

"Wheat is the whole story - the story is Russian wheat. They're saying wheat exports will now be 11 million tonnes but we think it will be less than that," said Joe Bedore, CBOT floor manager for trade house FC Stone.

 

September wheat on the Chicago Board of Trade rose to US$6.19 per bushel, which was the highest level for a front month since June 2009, before easing to US$6.16-1/4 by 11:13 a.m. CDT. The nearby month was up 3.6% from the previous day, on pace for its biggest daily percentage gain in nearly two weeks.

 

Front-month Chicago wheat futures have risen roughly 32% since the start of July, on track for the best monthly gain since 1996.

 

In Paris, French milling wheat futures jumped to new highs, with the November contract rising nearly 5% to EUR189.50 (US$246.2) a tonne.

 

Russia may harvest less than 80 million tonnes of grain this year, Deputy Economy Minister Andrei Klepach said on Tuesday (Jul 27), while SovEcon agricultural analysts said the drought might cut Russian grain production to less than 70 million tonnes.

 

Wheat prices are likely to remain supported as long as the downward revisions of the crop forecasts continue, Commerzbank said in a note. It added however that global supply is still sufficient despite the expected crop losses in Russia and other parts of Europe, so prices may come under pressure again when the harvest is mostly finished at the end of August.

 

Global wheat supplies will come into clearer focus on Friday (Jul 30), when the Canadian Wheat Board gives its first forecasts for Western Canadian wheat and durum production since June 11. Recent warm, dry Canadian weather has boosted crops, but record rains earlier left the largest unplanted acreage in 39 years.

 

September corn rose 3.8 % to US$3.76-1/2 a bushel and August soy gained 1.4% to US$10.12 per bushel.