August 6, 2010

US wheat prices soar amid Russian bans

Wheat prices soared limit up on US exchanges, and posted double-digit gains in Europe, after Russia banned exports of the grain, closing off shipments from the crop's third-biggest exporting country.

The jump in prices also spread to other markets, with corn setting a high for 2010 in Chicago, and ethanol prices soaring 7%.

Russia's president, Vladimir Putin, announced the curb as he unveiled help for the country's farmers, struggling against the worst drought since records began 130 years ago.

The restriction, which covers barley, corn, flour, rye and wheat, will stretch form August 15 to December 31. Russia also asked that it be extended to Belarus and Kazakhstan, partners in a customs union.

Kazakhstan, also a grain exporter, which is forecasting a 35% fall in grain production, said the matter would be considered at a customs union meeting due in two weeks' time.

Russia's announcement sent Chicago wheat for September up 8.3% to US$7.65 ¾ a bushel, the maximum rise allowed by the exchange, with the grain going limit up in Kansas and Minneapolis too, before retreating a little way from peaks.

In Europe, Paris wheat for November jumped 12.9% at one point to EUR236.00 a tonne, while its London peer soared 11.6% to GBP155.00 a tonne. Both prices were two years highs.

Prices may move higher yet, given that Russia's move had removed a big chunk" of export supplies from the market, and with a "weather market feeling" setting in, analysts said. Spring wheat accounts for about 40% of the country's total production.

However, Egypt's state grain trader, the General Authority for Supply Commodities, said it hoped that Russia would honour its contracts, the last of which was sealed on Wednesday.

The authority said it would not retender in one batch for the full quantity of any lost imports, but would seek to purchase 60,000 tonnes a month, adding that it had four months' supply already secured.