May 22, 2012

 

Worries on drought pushes US wheat price 6% higher

 

 

Amid continued fears over the dry weather threatening a range of wheat-producing countries, CBOT wheat prices surged 6% to their highest since September, while in Paris to its highest for almost a year.

 

Chicago's July wheat contract came within US$0.03 of regaining U$S7 a bushel before easing to end at U$S6.95, up 5.7% on the day and 17% for the week, its strongest weekly gain since the 1990s.

 

Kansas hard red winter wheat soared 4.8%, while Minneapolis spring wheat closed up 3.2%.

 

In Paris, the benchmark November contact closed 4.0% higher, the contract's highest close since June, while London wheat gained 3.3% to 158.80 a tonne.

 

The rises came amid continued concerns for crops in major producing countries facing a lack of rain.

 

US Commodities, saying it was "mildly concerned", clocked fears dryness in the US southern Plains, Europe, Russia, and northern China, along with parts of the north west US Corn Belt and Canadian Prairies".

 

The broker added: "Remember it was the hot and dry weather in 2010 that eventually caused the worst drought in 100 years in Russia and the start of the two-year bull market [in grains].

 

In Russia, Alexander Tkachev, regional governor for the southern Russian region of Krasnodar, has estimated that the dryness may cut dryness by 27%.

 

In the US, while major winter wheat production losses to dry weather look unlikely so late in the season, with harvest already under way in southern areas, the dryness has scotched hopes of near-record yields.

 

In Oklahoma, Jeff Edwards wheat specialist at Oklahoma State University Extension, estimated the state's average yield coming in at 36 bushels an acre, compared with a figure above 40 bushels an acre it would have achieved with more benign late conditions.

 

And forecasts show that crops yet to be harvested look unlikely to receive rain refreshment

 

"Little opportunity for relief is offered to the southern Plains and southern portions of the Midwest for the next week to 10 days," Benson Quinn Commodities said.

 

"Rain events are expected to be confined to northern regions of the US."