Wheat Soars to 23-Month High as Russia Bans Exports

http://www.bloomberg.com/news/2010-08-04/wheat-surges-to-22-month-high-on-russian-drought-corn-soybeans-advance.html

Wheat extended a rally to the highest price in almost two years


Wheat extended a rally to the highest price in almost two years on concern that other nations may follow Russia’s export ban, and the grain may reach $10 a bushel, a price not seen since the global food crisis in 2008.

Russian Prime Minister Vladimir Putin said that Kazakhstan and Belarus should also suspend shipments as Russia’s ban was announced yesterday from Aug. 15 to the yearend. “It’s got $10 written all over it,” said Peter McGuire, managing director at CWA Global Markets Pty, who correctly forecast Aug. 3 the surge to $8.50. Wheat last traded at $10 in March 2008, and a gain to that price would be a 23 percent advance from yesterday’s close.

Russia’s ban may benefit rival producers, including the U.S., the largest exporter, Australia and Argentina, according to Rabobank Group. Wheat prices have doubled in less than two months as drought slashed the harvest in Russia, the third- largest grower, and rains cut Canadian production.

“We believe that the rally in wheat prices is overdone, but would not short wheat,” Morgan Stanley analysts including Hussein Allidina said in a note to investors, referring to making bets that prices may drop. Other wheat-producing countries may opt to limit exports, potentially boosting prices, even though global wheat stockpiles are ample, they wrote.

Wheat for December rose as much as 6.5 percent to $8.68 a bushel on the Chicago Board of Trade, taking gains for that contract to 25 percent this week. The best-performing commodity this year on the UBS Bloomberg CMCI Index, ahead of coffee and nickel, traded at $8.5775 a bushel at 12:14 p.m. in Singapore.

Wheat has rallied as a heat wave in Russia, dry weather in Kazakhstan, Ukraine and the European Union, and flooding in Canada hurt crops. Russia’s drought is also threatening sowing plans for winter grain, the national weather center has said.



Here is a chart that puts it in perspective.