July 23, 2010

Wheat price has jumped as much as US$50 a tonne over the past month due to concerns in Russia's production and a probable export tariff imposition.

In early July, the USDA told the market less corn would be planted, and grain prices jumped. When that's combined with a view that countries like Russia won't deliver as much grain as previously thought, there's a surge in speculation.

Managing Director Lachie Stevens of LachStock Consulting, a grain analysis and advisory service, says that over the last week there's been a surge in prices. "Wheat futures have gone up over renewed concerns about Russian crop production, and the possibility that the Russian Government will put an export tariff on wheat exports," he says. Mr Stevens says it's also down to the wheat supply.

"As we came into the season supply was quite high, but with downgrades from Russia and Ukraine, as well as the Canadian downgrade earlier in the year, we've seen supply side of the crop being reduced quite significantly. But most people would suggest the supply side is still quite stable," he says.

"It's really a supply-driven rally which was initially started by wet weather in Canada, which has made it hard to plant," AWB's national acquisition manager Jon White agrees.

"It adds up to about 20 million tonnes of production coming off the balance sheet globally. We think that the hedge funds have an influence, but there's a major reason why they're acting, which is linked back to the production issues," he says.

Mr White says speculation over wheat supply, with influences coming from large US hedge funds, is also pushing up the price.