Wheat plunges as Russia moves to lift export ban

AP News
Posted: May 31, 2011 4:28 PM
Wheat plunges as Russia moves to lift export ban

Wheat prices plummeted 4.6 percent Tuesday after Russia said it will begin exporting wheat again, nearly a year after a drought decimated more than one-third of its crop.

Russia will lift its ban on wheat exports July 1. Russia said its winter wheat harvest was good and spring planting was 10 percent ahead of where it was this time last year.

The news came just as global wheat supplies have been tightening. The weather has been either too dry or two wet for ideal growing conditions in parts of the United States, Europe and Canada.

The result has been higher prices, with the additional cost passed along to consumers.

Russia was the world's third-largest exporter of wheat during the 2009-2010 season with 18.5 million metric tons sold to foreign buyers.

Analysts expect the country to export up to 15 million metric tons of wheat this year, but some question whether its growing region will be affected by dry conditions in parts of the Ukrainian-Black Sea region and Kazakhstan.

"They're betting that they've got this much to export and they haven't really harvested it yet and now you're getting into the dryness," Northstar Commodity analyst Jason Ward said. "I don't know if it's premature or not."

Mike Zuzolo, president of Global Commodity Analytics and Consulting LLC, speculated that Russian exports could take buyers away from U.S. in Europe and Southeast Asia.

Wheat for July delivery dropped 37.5 cents, or 4.6 percent, to $7.8225 a bushel after falling as low as $7.72 a bushel. The price still was 71 percent higher than it was a year ago at the end of May.

In other agricultural contracts for July, corn fell 11 cents to settle at $7.475 a bushel and soybeans dropped 3.75 cents to $13.76 a bushel.

Oil and energy products rose while metals were mixed on a weaker dollar. Commodities are priced in dollars, which makes them seem cheaper to buyers using other currencies such as the euro when the dollar weakens.

Oil prices also got a lift from reports of pipeline problems in the Midwest, which could tighten supplies. Benchmark crude for July delivery rose $2.11 to settle at $102.70 per barrel on the New York Mercantile Exchange.

In other Nymex contracts, heating oil rose 5.16 cents to settle at $3.053 per gallon, gasoline gained 1.9 cents to $3.0503 per gallon and natural gas rose 14.8 cents to $4.666 per 1,000 cubic feet.

In metals trading, August gold fell 50 cents to settle at $1,536.80 an ounce and July silver gained 44.2 cents to $38.305 an ounce.

July copper fell 0.85 cent to settle at $4.1775 a pound, July platinum rose $34 to $1,834 an ounce and September palladium rose $19.10 to $781 an ounce.