Chicago wheat futures soared more than 2 percent on Thursday amid expectations that world's No. 4 exporter Russia could soon run out of supplies, forcing some demand to shift to the United States, the top shipper of the grain.
The expectations stemmed from a large purchase of wheat from the Black Sea region, including Russian, by Egypt's main state-run wheat buyer, the General Authority for Supply Commodities, better known in trade circles by its acronym GASC.
While the purchase of 475,000 tonnes of wheat from Russia, Romania and Ukraine at an international tender highlighted how high prices had made U.S. supplies uncompetitive, it also raised the question if Egypt, the world's top wheat importer, was trying to grab as much Russian wheat as possible before any move by Moscow to limit sales -- as persistently speculated.
Russia has repeatedly denied that it would ban exports -- like it did in 2010 after a historic drought and sparking a major rally in prices -- due to a poor crop this year. Analysts said that Russia could run out of supplies for the export market if it maintains its current pace of sales -- it has sold Egypt's GASC 840,000 tonnes of wheat in the agency's five back-to-back tenders that began Aug. 10.
GASC Vice Chairman Nomani Nomani told Reuters in Cairo that rising prices for Russian wheat could make supplies from other countries more price competitive and said he wanted to clarify how much Russian wheat would be available for export.
Leading Russian grain analyst Dmitry Rylko, head of the Institute for Agriculture Market Studies told a conference in Moscow that Russia could import as much as 2.5 million tonnes of wheat from neighbor Kazakhstan.
COULD USDA RAISE SOYBEAN YIELD?
"Russia could be out of the market by the end of October," said grains analyst Dan Basse of AgResource Co in Chicago whose has clients in the Black Sea region. "People could be forced to buy from the United States or Canada." December wheat futures at the Chicago Board of Trade e nded 2.8 percent higher at $8.9 1- 3 / 4, with the market adding to earlier gains after the GASC tender results were announced.
Paris wheat futures ended up 0.6 percent at 261.5 euros per tonne.
CBOT November soybeans ended 1/2 cent lower at $17.4 7 per bushel, while December corn r ose 1 percent t o $ 7.98-1 /2.
Soybean futures fell for a second consecutive session on expectations that recent rainfall had helped to recoup some losses from the worst drought in half a century, but the market pared the losses near the close on bargain buying.
There were some expectations for the USDA to raise its estimate of the soybean yield in its next update of the crop in its supply-demand report on Sept. 12 d ue to rains in recent weeks in the northern and eastern Midwest helping the crop. "Soybeans are down on the FC Stone estimate that actually increased soybean production, the rains apparently have stabilized beans but not corn," a trader said.
Soybean futures were also weighed by a sharp drop in prices in the cash markets before the Midwest harvest gets underway and on expectations that farmers will step up sales.
Closely-followed trade house INTL FC Stone on Wednesday pegged the 2012 U.S. soybean crop at 2.739 billion bushels, above the U.S. government's forecast for 2.692 billion. However, the firm pegged corn output at 10.607 billion bushels, below the government forecast for 10.779 billion.
Corn futures were higher on forecasts for low U.S. corn output this year following the summer long drought and relentless heat that slashed corn yield prospects.
A large sale of U.S. corn totalling over 200,00 tonnes to an unknown destination as reported by the U.S. Department of Agriculture also helped support prices. E xport demand had been dented by price rising to record highs this summer.
UN SLASHES WORLD GRAIN SUPPLY ESTIMATE
The United Nations' food agency cut sharply its outlook for world grain supply due to the impact of drought in the United States and Black Sea countries, highlighting tensions that are maintaining prices at historically high levels.
Drought-affected crops in the United States and Black Sea producers like Russia will whittle down global grain supply this season and are keeping prices high, the UN's Food and Agriculture Organisation(FAO) said.
"Although we should remain vigilant, current prices do not justify talk of a world food crisis. But the international community can and should move to calm markets further," FAO Director General Graziano da Silva said.