Wheat, Corn Resume Rally as Russia Drought May Boost Demand for U.S. Grain
Wheat rose for the first time in three sessions and corn gained after Russia said a prolonged drought may force the government to further reduce its estimate of the grain output.
The harvest may drop below 80 million metric tons, compared with the current estimate of 85 million, Deputy Economy Minister Andrei Klepach said today. Russian grain traders may halt new export agreements because the government may limit shipments, the Moscow-based researcher SovEcon said last week.
“People are concerned that Russia may ban exports,” said Brian Grete, the senior market analyst for Professional Farmers of America Newsletter in Cedar Falls, Iowa. Demand may increase for crops from the U.S., the biggest exporter of wheat and corn, Grete said.
Wheat futures for September delivery rose 5.25 cents, or 0.9 percent, to $5.9475 a bushel at 10:19 a.m. on the Chicago Board of Trade. During the previous two sessions, the price fell 1.2 percent. Before today, the grain rose 38 percent since June 9 as drought damaged crops in parts of Europe and Russia and too much rain in Canada reduced the area planted this year.
Corn futures for December delivery rose 2.25 cents, or 0.6 percent, to $3.8025 a bushel on the CBOT, after yesterday touching $3.7575, the lowest level for a most-active contract since July 1. Before today, the commodity gained 9.9 percent since June 29, the day before the government said U.S. farmers planted less this year than they had planned.
Smaller Harvest
Russia’s grain harvest may fall below 70 million tons as yields drop amid the worst drought in at least a decade, SovEcon said today. The U.S. Department of Agriculture forecast Russian production at 79.8 million tons earlier this month, down from 93.5 million last year.
The price of wheat in the European part of Russia rose 15 percent to 4,850 rubles ($160) a ton in the week ending July 23, SovEcon said. Barley added 30 percent to 3,350 rubles a ton during the week, while rye climbed 33 percent to 3,400 rubles a ton.
“The Russian crop problems are not just about wheat,” said Chad Henderson, a market analyst for Prime Consultants Inc. in Brookfield, Wisconsin. “The trend has shifted from rising inventories to declining supplies.”
Corn is the biggest U.S. crop, valued at $48.6 billion in 2009, followed by soybeans, hay and wheat, government figures show.
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net
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