Wheat Extends Longest Rally Since November as Dry Spell May Damage Crops
Wheat rose to the highest price since January, marking the longest rally in almost eight months, after analysts lowered production estimates for Russia and France because of hot, dry weather.
Output in Russia, the world’s third-biggest exporter, may fall to 55 million metric tons this year because of drought, down 3.5 percent from a June 28 estimate, the Institute for Agricultural Market Studies said today. France’s soft-wheat production will be less than a government forecast of 35.3 million tons this year, Paris-based farm adviser Agritel said.
“If Russia continues to stay dry, that’s a big area” where output will be limited, said Tomm Pfitzenmaier, a partner at Summit Commodity Brokerage in Des Moines, Iowa. “I hear they’re getting scattered showers across Europe, so that may help.”
Wheat futures for September delivery rose 23 cents, or 4.5 percent, to $5.305 a bushel on the Chicago Board of Trade, the fifth straight gain and the longest rally since mid-November. Earlier, the grain reached $5.3225, the highest price for a most-active contract since Jan. 14.
The U.S. is the biggest exporter, followed by Canada.
The dollar’s decline may enhance the appeal of U.S. grain for importing countries. Since June 29, the greenback has dropped 2.6 percent against a basket of major currencies, and wheat has jumped 16 percent.
“This recession has been keeping a fair amount of pressure on the dollar,” Pfitzenmaier said. “It may continue to be set back, which may be supportive for U.S. commodities.”
Australia Dry Spell
Dry weather also may reduce grain output in Australia, the world’s fourth-largest exporter of wheat.
Rainfall averaged 11.1 millimeters (0.4 inch) last month, Australia’s fourth-driest June on record, the Bureau of Meteorology said on July 2. The southwest region of Western Australia had its third-driest June ever with 60 percent less moisture than normal, the bureau said.
Wheat is the fourth-biggest U.S. crop, valued at $10.6 billion in 2009, behind corn, soybeans and hay, government data show.