Wheat Futures Jump as U.S. Says Global Crop to Slump to Three-Year Low
Wheat prices increased for the first time in a week after the U.S. Department of Agriculture said global production will drop 5.1 percent to a three-year low.
Worldwide output will fall to 645.7 million metric tons in the year that began June 1 from 680.3 million a year earlier, the USDA said today in a report. The most-severe drought in at least 50 years in Russia and adverse weather in Canada and other producing countries have damaged crops. Exports from the U.S., the top exporter, will jump 36 percent, the USDA said.
“Supplies are getting tighter, and that means more pressure on producing big crops next year,” said Mark Schultz, the chief analyst at Northstar Commodity Investment Co. in Minneapolis. “We already have seen a rush of new demand.”
Wheat futures for December delivery rose 18.75 cents, or 2.6 percent, to close at $7.4375 a bushel at 1:15 p.m. on the Chicago Board of Trade. The price slumped 11 percent in the previous five sessions, partly on bets that global farmers will increase acreage. On Aug. 6, the commodity reached a 23-month high of $8.68 a bushel.
Russia, the world’s third-biggest producer last year, banned grain exports last week for the rest of 2010 to conserve supplies for domestic food production and livestock feed. Russian wheat exports will plunge to 3 million tons this year from 18.5 million a year earlier, USDA said today. Flooding reduced the crop in Canada, the second-largest exporter.
‘Jaw-Dropping Reduction’
“This is a jaw-dropping reduction in exports for Russia,” John Anderson, an economist at the American Farm Bureau, said in a statement today. “The United States should pick up almost half of the wheat exports that would have gone to Russia. We have wheat when the other major exporters don’t have as much wheat.”
The U.S. sold 1.33 million metric tons to foreign countries in the week that ended Aug. 5, up 58 percent from a week earlier and the largest weekly sale since September 2007, the USDA said today in a report.
U.S. exporters are shipping 275,000 metric tons of hard- red spring wheat through Canada that eventually will be sent elsewhere, according to the Canadian Wheat Board. Canada will harvest 20.5 million tons of the grain this year, down from 26.5 million a year ago, the USDA said today.
“It looks like some Canadian exporters are short of supplies,” Northstar’s Schultz said.
Wheat is the fourth-biggest U.S. crop, valued at $10.6 billion in 2009, behind corn, soybeans and hay, government data show.
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net
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