Bloomburg Businessweek


Wheat Rises, Extends Rally, as Heat May Hurt EU, Russian Crops
July 08, 2010, 11:24 AM

By Tony C. Dreibus

July 8 (Bloomberg) -- Wheat rose, extending a rally to the highest price in almost six months, as parched weather in countries near the Black Sea and in Western Europe may curb output.

A drought is intensifying in Russia’s Volga District and in Kazakhstan, according to Accuweather.com. Dry weather in France, the European Union’s biggest wheat grower, also may curb production. Some hedge-fund managers and other speculative investors may be buying back bets that prices would fall and liquidating positions.

“We’re starting to see more and more concern about the weather in Russia and Europe,” said Frank Cholly, a senior market strategist at Chicago brokerage Lind-Waldock. “Those factors are going to let the market continue higher. We still have a lot of shorts to cover.”

Wheat futures for September delivery rose 1.15 cents, or 0.2 percent, to $5.3175 a bushel at 10:06 a.m. on the Chicago Board of Trade. The price earlier touched $5.405 a bushel, the highest level since Jan. 14.

Before today, wheat jumped 16 percent since June 29, the last time the most-active contract declined. Wheat is headed for its sixth straight gain, which would be the longest such streak since mid-November.

Russia is the world’s second-biggest exporter of wheat behind the U.S., according to the International Grains Council.

Speculative short positions, or bets that prices would fall, outnumbered long positions by 47,119 contracts on the CBOT as of June 29, the Commodity Futures Trading Commission said last week. As the price rises, some investors who were short may liquidate positions to avoid losses.

Wheat is the fourth-biggest U.S. crop, valued at $10.6 billion in 2009, behind corn, soybeans and hay, government data show.

--Editors: Michael Arndt, Steve Stroth.

To contact the reporter on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.