US wheat prices soared to a 22-month high on Monday on supply concerns as the worst Russian drought in 130 years appeared to be worsening and as dry weather sparked production worries in western Australia. Russian leaders declared a state of emergency on Monday as heat and drought sparked wildfires and scorched crops.
The drought has destroyed crops in an area the size of Portugal and pushed thousands of farmers to the verge of bankruptcy. Spot-month wheat futures on the Chicago Board of Trade rose as much as 7.5 percent early on Monday to break past the key psychological level of $7 a bushel for the first time since September 2008, before profit-taking clipped gains.
Corn and soyabeans followed wheat's lead, but later retreated from their highs as good crop development weather around the US Midwest and expectations for bumper harvests fuelled profit taking, traders said. Rough rice futures briefly rose the 50-cent daily trading limit in sympathy with soaring wheat.commodities and selling the dollar," said Paul Haugens, vice president of Newedge USA. Wheat was above key technical points, and Monday's price surge prompted a fresh wave of buying by trend-following funds, traders said.
"It's a feeding frenzy and it started in wheat," a CBOT trader said. CBOT September delivery wheat futures settled up 31-3/4 cents, or 4.8 percent, at $6.93-1/4 a bushel, after earlier reaching $7.11-1/4, the highest level in 22 months. Benchmark November wheat in Paris added 6.2 percent and hit new contract highs.
Funds bought about 13,000 Chicago wheat contracts on Monday, traders estimated. A major Russian grain lobby on Monday said the country's grain crop could fall to 72 million to 78 million tonnes, down a quarter from a year ago, and exports may shrink by half to 11 million to 19.5 million tonnes.
The forecast fuelled further market talk that Russia could restrict exports, which added to the fierce rally that drove Chicago wheat futures in July to their biggest monthly grains since at least 1959. An analyst said on Monday the worsening drought also could put Russia's winter crop sowing in jeopardy.
Some global wheat importers have adjusted their recent hand-to-mouth buying strategies to secure supplies on worsening drought in Europe and rising concerns about dryness in parts of Australia, the world's No 4 exporter. Egypt, the world's top wheat importer, made its largest international wheat purchase in a month, buying 180,000 tonnes of Russian wheat. Prices were more than $60 per tonne higher than a month ago.
CORN EASES, SOYABEANS TRIM GAINS Corn slipped lower and soyabeans finished below early highs as recent beneficial crop weather around the US Midwest bolstered expectations for bumper crops this fall, traders said. Active farmer selling on Monday added pressure, particularly in corn, they said.
"The general perception is that last week the corn crop got better, the yield probably went up somewhat. That's why it's struggling," said Charlie Sernatinger, an analyst with ABN Amro. Soyabeans clung to modest gains as the bulk of the crop is entering pod-filling, a key yield-determining stage of development. CBOT September corn futures settled 2-1/4 cents lower at $3.90-1/2 per bushel, after earlier rising to a four-month high. August soya was at $10.53-1/4 a bushel, up 3/4 cent on the day but down from an earlier 6-1/2-month peak. CBOT floor sources estimated that commercial traders sold 10,000 to 12,000 corn contracts on Monday, while funds bought 7,000 to 8,000 corn contracts and 5,000 soyabean contracts.
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