Chicago wheat futures hits 13 month high on Russian export worries

Chicago wheat surged to a 13-month high Wednesday on speculations that the severe and persistent drought held southern Russia in its grip may largely reduce its wheat exports and increase demand for U.S exports. Soybean and corn both rallied.

September wheat surged 20.5 cents, or 3.4 percent, to 6.155 U.S. dollars per bushel, the price reached 6.2325 dollars, the highest level since June 12, 2009. December corn climbed 13.75 cents, or 3. 6 percent, to 3.9075 dollars per bushel, the biggest gain for the most-active contract since June 30. November soybean rose 12.5 cents, or 1.3 percent, the biggest gain since July 15, to 9.78 dollars per bushel.

Trader noted that the wheat futures surged on fears that that Russian and Ukraine grain exports would be severely reduced, as a results of the adverse weather in their key grain-growing region. "The Russian grain crop has been reduced by one of the worst droughts in decades. The estimates of Russian grain production are down to 70 million tons, more than 20 million tons lower than last year. As a result, Russian wheat exports now are expected to be less than half of a year ago level," said Mario Balletto, a grain analyst for CitiGroup.

"European grain and rapeseed crops have been reduced by unfavorable weather this spring. As a result, European imports of soybean meal could expand substantially to offset reduced supplies in feed wheat and domestic rapeseed meal," said Balletto. "Also European imports of soybean oil may need to increase substantially to offset reduced supplies of domestic rapeseed oil and sunflower seed oil from the Ukraine and Russia."

USDA announced on Wednesday a sale of 120,000 tons of soybeans to China for delivery in the 2010/11 crop marketing year, which provided major support to soybean prices on Wednesday. "Chinese demand continues to be impressively strong for soybeans, they continue to buy a million tons a week. China may also become a sizeable importer of U.S. corn later this year, depending on the outcome of the domestic corn crop," said Balletto.

Source: Xinhua