Wheat Heads for Biggest Monthly Climb Since 1973 on Concern About Drought

Wheat rose in Chicago, heading for the biggest monthly gain since 1973, on concern that a crop- damaging drought in Russia and parts of Europe will curb exports, lifting demand for U.S. supplies.

September-delivery wheat climbed for a third day on the Chicago Board of Trade, adding 1.3 percent to $6.24 a bushel at 1:21 p.m. Paris time. Futures earlier rose to a 13-month high of $6.2425.

“Extreme heat and drought” will continue to affect wheat areas in Russia and Kazakhstan in coming days, Telvent DTN Inc. forecast yesterday. Russia’s wheat exports may fall by almost half this crop year as the drought causes a local shortage, the Institute for Agricultural Market Studies said today.

“If the market feels we’re losing large amounts of supply, the risk is heavily to the upside,” Alex Bos, an analyst at Macquarie Bank in London, said by phone today. “A lot of the rally has been driven by the fact that the market was so heavily short coming into this weather scare.”

The most-active wheat contract has climbed 30 percent in Chicago so far in July, on track for the biggest such gain since August 1973.

Milling wheat for November delivery traded on NYSE Liffe in Paris was last up 1.1 percent at 191.50 euros ($250.60) a metric ton, the sixth increase in seven sessions. The contract climbed as high as 193.75 euros, the highest level since it began trading in March 2009.

Russian Exports

Russia’s outbound wheat shipments may decline to 9.5 million tons from last year’s 18 million tons, Oleg Sukhanov, chief specialist for grain markets at the Moscow-based institute, also known as IKAR, said by phone today.

“It’s certainly the supply side of the market, which is really underpinning the gains that we’re seeing,” Toby Hassall, a research analyst at CWA Global Markets Pty, said by phone from Sydney today. “It’s a case of the wheat market leading corn and soybeans higher.”

December-delivery corn advanced 0.9 percent to $3.9425 a bushel in Chicago. Soybeans for November delivery rose 0.6 percent to $9.8425 a bushel.

“The world is starting to focus once again on agriculture” because of weather-related crop concerns, fertilizer producer Potash Corp. of Saskatchewan said today as it reported higher second-quarter profit. “As a result, prices for crop commodities are strengthening. Returns for key crops such as corn are expected to be the second-highest on record.”

24% Decline?

The wheat harvest in Russia, the world’s third-largest grower in the 2009-10 season, may fall 24 percent this year to as little as 47 million tons on drought and lower yields, according to IKAR, down from an earlier estimate of 51 million tons. Russia harvested about 62 million tons of wheat in 2009.

Grain exports from Ukraine, the second-largest wheat grower in the former Soviet Union, have been “slow” this month, Agriculture Minister Mykola Prysyazhnyuk said yesterday.

Ukraine’s grain exports including wheat may drop to 18.5 million tons or lower this season, from 21.2 million a year earlier, the Ukrainian Agrarian Confederation said last week.

India has 10 million tons of wheat and rice that are at risk of rotting because of a lack of storage capacity, the Financial Times reported, citing estimates “circulating within government.”

The South Asian nation is the second-largest grower and consumer of wheat and rice, according to the U.S. Department of Agriculture. India will sell 300,000 tons of wheat and rice to Bangladesh and Nepal, Farm Minister Sharad Pawar said yesterday.

To contact the reporters on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net; Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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