Or, as the headline at the Wall Street Journal says "Wheat Goes Up, Prices to Follow ".
First up, Reuters:
Wheat races to new highs as Russia halts exports
Wheat markets raced to fresh highs on Thursday, with Chicago wheat trading limit-up, as Russia announced a halt to grain exports from next week in response to a drought that has withered crops.
Russia's worst drought on record has devastated crops in parts of the country and sent international grain prices soaring as markets have speculated on restricted supply from one of the world's leading exporters.
Prime Minister Vladimir Putin told a government meeting on Thursday that a temporary ban on grain exports was needed, with a spokesman later saying this would come into force from August 15 and would apply to contracts that had been already signed.
The announcement followed feverish speculation about possible export curbs, which was fueled by a report from Russian news agency Interfax earlier on Thursday that a ban on grain exports could be implemented as soon as next week.
September wheat on the Chicago Board of Trade rose by a limit-up 60 cents to $7.85-3/4 by the close of the electronic session, a high for the contract and a 23-month high for front-month prices....MORE
Here's some backround from the Journal's Tom Polansek:
Wheat futures' eight-week rally regained steam on Wednesday by surging 6.7% to above $7.25 a bushel on the Chicago Board of Trade, their highest since September 2008....Finally, from Bloomberg a look at one of the producers that will be needed to fill the gap left by the Russian decision:
...For some firms, higher wheat prices could turn out to be a boon. Agribusiness giant Bunge Ltd. said the latest rally could have a "positive impact" on its grain business, which includes transporting agricultural commodities. The persistent drought in Russia could shift demand for wheat to the U.S., which has ample supplies, and boost shipments from the U.S. to faraway destinations.
Drought-stricken wheat crops in Europe and Russia could boost the company's agribusiness margins later in the year, as the amount of wheat available for livestock feed declines, Bunge CEO Alberto Weisser said last week on an earnings conference call. That could drive demand for Bunge's products, including corn and soybean meal.
The Food and Agriculture Organization reaffirmed the tightening supply situation as the latest organization to cut its 2010 global wheat production forecast. It pegged production at 651 million metric tons, down 3.7% from its previous estimate, but said that figure represented an adequate supply of the food staple.
Traders are worried that scorching heat and dryness may push Russia to ban wheat exports and could hinder plantings of the next crop this autumn. Russia, a major wheat producer, is not expected to see significant relief from the drought for at least seven to 10 days, according to private weather firm Telvent DTN.
"I can see some problems if we don't have rain this fall in Russia," said Sid Love, an analyst at Kropf & Love Consulting.
Egypt, the world's largest importer, on Wednesday booked 180,000 tons of Russian wheat in a tender, its second such purchase this week. Some market watchers said the deal showed Russia still had wheat to sell at a competitive price, but others said it showed exporters were scrambling to make sales before a ban takes effect.
Wheat shipments from Australia’s next harvest will probably begin at a rapid pace as dry weather cuts Russian production, said AWB Ltd., the nation’s largest exporter of the food grain.
“Given the current market conditions we would expect a very strong start,” AWB Trading Manager Tim Hutchison said in Melbourne by phone today. The marketing year starts Oct. 1.
Wheat soared to the highest level in 23 months as a heat wave in Russia and dry weather in Kazakhstan, Ukraine and parts of Europe cut production. Australia’s export program accelerated after a slow start caused by a surplus and competition from Black Sea countries and Germany, Hutchison said. CBH Group said today there was “plenty of demand” in the Australian region.
“We have picked up certainly from the pace we would have expected several months ago and that will continue to ramp up,” he said. Buyers purchasing wheat according to price were more likely to turn to Australia, he said.
Wheat for December delivery, the contract with the largest open interest, jumped as much as 3 percent to $7.7825 a bushel in Chicago, the highest level since September 2008. The price touched $4.255 in June. ASX Ltd.’s January-delivery Western Australia wheat futures contract traded at A$304.10 ($278) a metric ton at 5:33 p.m. Melbourne time.
Uncertainty over Russian export policy and supplies from other shippers including Australia and Argentina would help underpin prices, Hutchison said.
Big Pull-Back Unlikely
“It’s a question of trying to get some of the uncertain questions answered,” he said. “Until that occurs it is going to be difficult to have major pull-backs in the market, although when we are moving at the rate we are, you can certainly expect some steep corrections,” he said....MORE