August 2, 2010

US wheat futures jump after strongest month

US wheat jumped 2.5% to a 22-month high as the market started a new month on a bullish note following its biggest monthly gain since at least 1959 in July on Black Sea crop concerns.

Corn and soy futures gained more than 1%, tracking the bull run in wheat despite favourable weather aiding crops in the US Midwest.

Wheat futures at the CBOT gained 42% in July, exceeding a gain of 38% in 1964, according to records going back to 1959. The market is up 60% from June lows.

Meanwhile, the worst drought in decades in Russia's lush Black Sea region has led analysts to sharply cut crop estimates for that major wheat exporting region. The International Grains Council on Thursday cut its forecast for Russia's wheat crop by 7 million tonnes to 50 million and Kazakhstan by 3 million to 13.5 million.

The hottest weather since records began 130 years ago in Russia has withered crops and pushed thousands of farmers to the verge of bankruptcy.

The Emergencies Ministry said by Sunday morning, 774 fires, including 369 that started since Saturday, were raging in an area of about 130,000 hectares.

CBOT September wheat was up 2.5% at US$6.77 a bushel by 0624 GMT, after touching a high of US$6.80 a bushel, the highest since October 1, 2008. September delivery corn gained 1.2% to US$3.97-sfr1/4   a bushel and August soy added 1% US$10.63-sfr1/2   a bushel.

Investor funds bought an estimated 16,000 CBOT wheat futures contracts, 80 million bushels, or 3.6%, of this year's estimated US wheat production of 2.216 billion bushels.

Managed funds have cut their net short position in wheat for the past six weeks and could even become net long on the commodity for the first time since April 2008 if the trend continues.

Wheat traders are also closely watching the wheat crop in Australia, where dry weather in Western Australia has raised some concerns.

Wheat crops in Western Australia, the country's top grain exporting state are under threat from dry weather but favourable conditions elsewhere could make up for any crop loss.

In the US Midwest, rains and warm temperatures forecast this week may favour corn pollination and development of soy, although hot weather could stress crops in some areas, a forecaster said.