Wheat dropped from the highest level in seven months on expectations that record global production will outweigh concerns Russia is set to curb exports as the ruble’s collapse increases domestic costs for bread.
The contract for March delivery slumped as much as 2 per cent to $6.425 a bushel on the Chicago Board of Trade and was at $6.475 by 2:48 p.m. in Singapore. Prices climbed to $6.77 yesterday, the highest for a most-active contract since 20 May.
Futures jumped 6.8 per cent this week amid speculation that rising food prices in Russia would prompt the world’s fourth- biggest exporter to restrict grain sales. The nation is slowing shipments by denying certificates grain sellers and buyers need after sanitary inspections, an export group said this week. The ruble weakened to an all-time low against the dollar this week.
"Both Russian macro and microeconomic conditions continue to contribute to market volatility, placing significant upward pressure on grain market prices," AWB, a unit of Cargill Australia Ltd., said in a note today. "Until the market can quantify reduction in supply, prices will remain speculative."
The nation is denying certificates for grain destined for countries other than Egypt, Turkey, India and Armenia, according to a letter from the National Association of Exporters of Agriculture Products, addressed to Deputy Prime Minister Arkady Dvorkovich. The trade group called the move a “covert form” of export restriction.
Short-Lived
In 2010, a drought reduced domestic harvest spurred Russia to ban shipments. Wheat prices surged 47 per cent that year. The current price jump may be short-lived, with world grain supplies forecast at a 15-year high by the end of the season, and Russia having completed a large part of its export program, according to Abdolreza Abbassian, a senior economist at the United Nations’ Food & Agriculture Organization.
"Russia is adding volatility rather than setting a trend," Abbassian said this week. "There’s so much grain available that probably it will give some short-term price support, but not long-term."
Restricted trade in the first half of next year may mean that only about 4 million tons of Russia’s forecast total 2014-2015 wheat exports will be unavailable, Australia & New Zealand Banking Group Ltd. analyst Paul Deane said yesterday.
Corn for March delivery fell 0.4 per cent to $4.095 a bushel in Chicago. Soybeans lost 0.1 per cent to $10.42 a bushel.
Bloomberg News edited by ESM
