Market News

Russia’s wheat woes fuel U.S. market rise

Severe drought in Russia has been the main factor behind soaring U.S. wheat prices this summer. 

Russian officials acknowledge that the drought has likely destroyed at least one-fifth of their crop.  And they estimate that Russian wheat exports could drop as much as 40 percent from 2009 levels.  There are unconfirmed reports that Russia may even halt its wheat exports.

That news, combined with a sharp increase in fund buying, has caused the wheat markets to skyrocket.  So is the market overreacting?  Time will tell, but U.S. Wheat Associates spokesman Steve Mercer says the world wheat supply isn’t much different from last year.

“The world supply of wheat—even with problems in Russia—really is not going to be that much less for this year,” Mercer says. “So it’s odd that the markets are reacting this much, this fast—but, you know, it’s a good opportunity for us.”

But Mercer says Russia’s woes will definitely be positive for U.S. wheat exports.  He says the International Grains Commission recently raised its estimate of U.S. exports to 29-point-two million metric tons, up 17 percent from its original forecast.

“We’ve seen a similar rise in USDA’s forecast,” Mercer says. “It will be really interesting  to see what they say next week—the World Agricultural Supply and Demand Estimates comes out on August 12^th.  So it will be interesting to see what they say.”

Meanwhile, new trading records are being set on the Kansas City Board of Trade. Trading volume for the month of July broke all previous monthly records for the exchange and the hard red winter wheat futures contract. And on Friday, July 30^th, new records were set for hard red winter wheat single-day volume and open interest. 

 AUDIO: Steve Mercer (11 min MP3)