US wheat at 4-1/2 month top on Russia export worries

Wednesday, 01 February 2012 17:30

HAMBURG/NEW DELHI: US wheat touched a four-and-half month high on Wednesday, rising for a second straight session as cold weather in east and west Europe brought fears of crop losses, while reports key exporter Russia may restrict overseas sales also supported.

A fierce cold snap is engulfing Russia, Ukraine and western European grain producers France and Germany and there are fears deep frosts could damage harvests.

Chicago Board of Trade March wheat rose 1.5 percent to $6.76 a bushel by 1144 GMT, after gaining 3 percent on Tuesday.

"The cold weather in east and west Europe is the main driving factor in the market today," said Rabobank analyst Erin FitzPatrick. "There is concern about weather risk to crops in Ukraine, Russia and in parts of west Europe including France.

"Speculators' net short position in CBOT wheat is near record levels and so a feeling is developing that any problems with wheat crops could trigger short covering."

Chicago corn and soybeans also rose on estimates of lower production in South America following a severe drought.

Chicago March corn gained 1.2 percent to $6.47-1/4 a bushel, while March soybeans rose 0.5 percent to $12.06 a bushel.

European benchmark wheat in Paris also surged to a new 7-month high.

Paris March wheat was 1.9 percent higher at 219.00 euros a tonne after hitting 221.50 euros a tonne earlier in the session, a price last seen in June 2011.

Ukraine's state weather forecaster said on Wednesday the country's winter grains harvest could fall by 42 to 58 percent to 10 million to 14 million tonnes due to poor weather during sowing and winter damage.

In the past week, world wheat markets have firmed on expectations that Russia will put the brakes on exports.

"Prices have gone up because Russia has said that there could be restrictions on wheat exports," said Lynette Tan, analyst with Phillip Futures in Singapore. "Any curb by Russia will have strong implications on the trade and, therefore, I see a further upside to wheat."

Russia's Deputy Prime Minister Viktor Zubkov told Reuters on Tuesday the Russian government would determine on Thursday how much grain could be exported this crop year before it considers imposing a protective export duty to preserve domestic supplies.

Tan said corn rose due to lower output forecast in Argentina.

Despite late rains salvaging some of the crop in South America, production is still a concern, said Ker Chung Yang, an investment analyst at Phillip Futures.

Argentina's soy and corn harvests in 2011/12 are expected to be smaller than the previous year, raising concerns that the drought might crimp world food supplies.

German analysts Oil World on Tuesday cut its forecasts of soybean crops in Argentina and Brazil, saying recent rain had not been enough and some drought damage to crops in both countries is irreversible.