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Wheat Set to Climb as Drought Cuts Global Crop, Australia Says

Wheat prices may climb 20 percent in the year through June as drought threatens crops from the U.S. to Russia, boosting global supply concerns, said last year’s second-biggest exporter.

The free-on-board Gulf price of U.S. hard-red winter wheat, the so-called world indicator price, may average $360 a metric ton in the year to June 30 from $299 a ton a year earlier, the Canberra-based Australian Bureau of Agricultural and Resource Economics and Sciences, or Abares, said today. World trade may drop 9.7 percent to 131 million tons on reduced supply, it said.

Prices in Chicago have climbed 30 percent this year, making the world’s most used food-grain the best performer among the 24 commodities tracked by the Standard & Poor’s GSCI Spot Index. That may boost global food costs. Russia, last year’s third-biggest wheat exporter is bracing for its coldest winter in 20 years after farmers planted crops into parched soil. The crop in the U.S., the top shipper, is in the worst condition in at least 27 years, the U.S. Department of Agriculture said Nov. 26.

“Price movements in the second half of 2012-13 are expected to be closely linked to the harvest outcomes of major exporting countries in the southern hemisphere, such as Australia and Argentina, and seasonal conditions for plantings of the 2013-14 wheat crop in the northern hemisphere,” the bureau said. Prices may average significantly higher if dry conditions persist in major producers such as the U.S., it said.

Four-Year High

Wheat for March delivery was little changed at $8.4825 a bushel on the Chicago Board of Trade at 10:41 a.m. in Singapore. Futures reached at four-year high of $9.4725 in July.

Australia cut its harvest and export estimates last week after dry weather. Output is set to reach 22 million tons, 2.2 percent below a September estimate and compared with a record 29.9 million tons a year earlier, Abares said Dec. 4. Exports may be 20.9 million tons in the year that started Oct. 1, from an all-time high of 24.7 million tons a year earlier, it said.

World food prices, while down 11 percent from a record in February 2011, were the highest ever on average during the past two years and more than doubled in the past decade, according to the United Nations’ Food & Agriculture Organization in Rome.

The market may be “underestimating the problems” in wheat supply, Abdolreza Abbassian, an economist at the FAO, said on Dec. 6. World wheat stockpiles will shrink this year to the smallest since 2009, according to the USDA.

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