August 17, 2010

Wheat prices tumble amid hopes for Russian rain

Wheat prices lost their week-long battle to hold the US$7 a bushel mark in Chicago after on forecasts that Russia was heading for rain, potentially heralding an end to the drought which has sent global grain prices soaring.

Prices had held in positive territory for much of the day, after SovEcon analysts lowered the bar further on Russia's grain hopes in a report which warned that the country's barley production would fall to its lowest in 40 years.

However, the market fell back after meteorologists said that large swathes of Russia, including the drought-struck Volga region, were expected to see rains in the first half of this week.

While the rain was viewed as holding out little hope of helping this year's crop, which SovEcon said may fall below 60 million tonnes, it was seen as improving prospects for winter sowings which Viktor Zubkov, Russian deputy prime minister, warned last week may slump by one-third because the ground was too dry for planting.

Chicago wheat for September finished 5.5% lower at US$6.63 ¾ a bushel. Paris wheat for November closed down 1.2% at EUR212.00 a tonne, while its London feed wheat peer lost 1.9% to GBP152.00 a tonne.

Meanwhile, analysts said the pace of wheat's decline also appeared to have been accelerated by a barrage of sell stops underneath trigger points, such as Friday's low of US$6.89 a bushel, placed by speculators not getting returns for their business.