Wheat Falls More Than 7{4d08edaf359bc2115b18a651716ebd427a137946ddca2143fa23b3ea721061e4} Friday


The following is an article from the Wall Street Journal:

Wheat Falls More Than 7{4d08edaf359bc2115b18a651716ebd427a137946ddca2143fa23b3ea721061e4}


Wheat prices plummeted as other big exporters stepped in to fill the gaping void in international grain markets created by Russia’s ban.

Over the past days, farmers across the U.S. grain belt have released millions of bushels from storage into the global supply chain. Wheat prices on Friday fell by 60 cents on the Chicago Board of Trade, the maximum amount allowed by exchange rules, to $7.2575 a bushel, erasing all of Thursday’s gains.

With stockpiles at 23-year highs and the winter wheat harvest wrapping up, U.S. wheat growers stand to make a windfall from woes in other countries. While Russia has bore the brunt of a severe drought that has destroyed crops, parts of Europe’s wheat belt are also parched and Canada, another big exporter, got a late start due to spring flooding.

“Most farmers are sitting pretty above $8 a bushel,” said Karl Setzer, an adviser with MaxYield, a farmer cooperative based in West Bend, Iowa. “I tell them they should make a sale.”


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.Many are taking his advice, putting downward pressure on prices. About 21 million bushels of wheat were shipped out of the U.S. last week, according to the latest U.S. Department of Agriculture data, compared with 16.6 million bushels the previous week. Cumulative shipments for the entire marketing year, which began on July 1, were 36{4d08edaf359bc2115b18a651716ebd427a137946ddca2143fa23b3ea721061e4} higher on year at 141.5 million bushels.

In falling from nearly two-year highs—the nearby contract hit $8.41 a bushel earlier on Friday—wheat futures were taking their cues from the so-called cash market, where grains change hands right away. Already on Thursday, gains in cash-market prices were lagging those on the futures markets, a sign that the eight-week rally that had seen prices almost double was losing steam.

“If the situation isn’t as bad as everyone says, there’s a good chance we’ve seen the top for the year,” Mr. Setzer said, calling talk of $10-a-bushel wheat a “little bit of a stretch.”

Although the weather situation in Russia hadn’t improved—Muscovites were fleeing the capital city to get away from smoke from burning wildfires—officials there were already beginning to soften their stance on the ban, announced by Russian President Vladimir Putin on Thursday.

Russia may adjust its ban on grain exports after officials have an assessment of the year’s harvest, First Deputy Prime Minister Igor Shuvalov told the Ekho Moskvy radio station.

Analysts say that could be as early as October, well before the Dec. 15 date set by Mr. Putin. Mr. Shuvalov also said that Egypt, the world’s biggest importer, will be able to take delivery of at least 470,000 metric tons of Russian wheat marked for delivery in September despite the ban.

The European Union is also experiencing a pickup in business. EU licenses to export soft wheat, a variety used in pastries and packaged snacks, for the week ended Aug. 3 were 35{4d08edaf359bc2115b18a651716ebd427a137946ddca2143fa23b3ea721061e4} above the four-week average and the highest figure since the middle of June, according to Commerzbank.

The recent downward revisions to Russian crop forecasts and exports “should spur demand from other exporters. Since the EU is the second-largest wheat exporter behind the U.S., the EU should benefit as well,” said Carsten Fritsch, a wheat analyst at Commerzbank.

Rabobank, a Netherlands-based bank with an agribusiness focus, lowered its 2010-11 Russian wheat estimate to 45 million tons, 25{4d08edaf359bc2115b18a651716ebd427a137946ddca2143fa23b3ea721061e4} less than in the previous year. Rabobank now forecasts that Russia will only export three million tons of wheat in this crop year if the export ban is implemented, compared with about 18 million tons in the previous year.

The exports out of the former Soviet Union won’t lead to global wheat shortages since other countries, including China and India in addition to the U.S., are sitting on ample wheat inventories. Importers like Egypt, however, will be forced to rely on a smaller pool of suppliers. China, for instance, only exported 400,000 tons of wheat last year.

—Gary Wulf and Andrea Hotter contributed to this article.


Source:  Wall Street Journal


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