The following article is from the Wall Street Journal:
By TOM POLANSEK
U.S. wheat futures tumbled in anticipation that prices will skid when Russia resumes grain exports July 1.
Prices for soft red winter wheat dropped 37.5 cents, or 4.6{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}, to settle at $7.8225 a bushel on the Chicago Board of Trade. Corn and soybean futures also slid.
Wheat prices fell as low as $7.72 after Russia confirmed it will lift the nearly year-long ban on grain shipments. The government halted exports last August when a historic drought devastated its crops; this year, it expects farmers will bring in large harvests.
The decision to restart exports had been expected. Still, the announcement fueled fears of reduced demand for U.S. wheat because Russian exporters “tend to be the low-price leaders in the world wheat trade,” said Dale Durchholz, an analyst for AgriVisor, an agricultural advisory firm in Illinois. That indicates U.S. prices will need to drop to become competitive in the world market.
With the ban removed, Russia’s wheat exports are expected to climb 150{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2} from last year to 10 million tons, according to data from the U.S. Department of Agriculture. Total grains exports could reach 15 million tons, news agencies quoted Russian Deputy Prime Minister Viktor Zubkov as saying.
“A lot of numbers are being thrown around about how big their exports could be,” said Doug Bergman, a broker for MF Global.
Grain users remain concerned about poor weather reducing global output. Drought has reduced wheat output in the U.S. Southern Plains and Western Europe, while the U.S. Northern Plains are too wet to plant wheat.
Western Europe’s largest producer, France, is a major wheat exporter and has already declared a state of crisis because of drought.
The impact of the damage will depend on the weather in the coming weeks. A hot summer would make things worse and lead to an even lower yield from the wheat crop, while rain could improve the situation.
“It is impossible to know the loss of yield now, but we already know there will be a loss,” French Agriculture Minister Bruno Le Maire said told reporters Tuesday.
Traders estimate production could cut the country’s exportable surplus to just five million tons in 2011-12, down from almost 13 million tons in 2010-11.
Russia’s harvest is expected to offset some of the crop losses in Europe, as both regions sell to key buyers in the Middle East. Still, some traders fear Russia could limit exports again if world wheat prices surge on smaller-than-expected global output.
Corn futures fell as grain exports from Russia may reduce the demand for corn used for animal feed. Corn for July delivery settled down 11 cents, or 1.5{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2}, to $7.475 a bushel. Soybean futures edged 0.3{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2} lower to $13.76 a bushel.
Source: Wall Street Journal
Posted by Haylie Shipp
