Wheat prices surged Thursday after the U.S. government lowered its expectations for global wheat production as a devastating drought continues to erode Russia's crop and that nation's export ban remains in effect.
The Agriculture Department's revised global forecast calls for 2010-2011 production of 645.7 million metric tons of wheat, which is 2.3 percent less than it had estimated in July. More than one-third of Russia's wheat crop has shriveled during the hottest summer in 130 years, which has sparked massive fires and prompted a ban on wheat exports through the end of the year. Hot weather also has hurt crops in Kazakhstan, while heavy rains damaged wheat in the Ukraine.
Russia was the world's third-largest wheat exporter in 2009 behind the U.S. and Canada. The question now is whether the dry weather will hamper fall planting and perhaps affect next year's crop, Telvent DTN analyst John Sanow said.
"They're going to need some rain and a bunch of it," he said.
U.S. farmers appear well positioned to take advantage of higher prices. The agency said Thursday that U.S. farmers are poised to harvest what could be record-setting wheat, corn and soybean crops. U.S. wheat production is forecast at 2.26 billion bushels, up 2 percent from 2009. Yields are expected to rise to 46.9 bushels per acre, which would be a U.S. record.
Corn production is estimated at 13.4 billion bushels for the year and soybean production at 3.43 billion bushels. Both estimates would mark a 2 percent increase over 2009's record-setting production.
Wheat for December delivery rose 18.75 cents to settle Thursday at $7.4375 a bushel after hitting $7.5850 a bushel earlier in the day. The September futures contract hit a two-year high of $7.8575 a bushel last week.
December corn added 10.75 cents to $4.2175 a bushel and November soybeans gained 13 cents to $10.285 a bushel.
In other commodities, investors put more money into gold after the Labor Department reported applications for jobless benefits rose last week, reinforcing concerns about the slowing global economic recovery.
Gold for December delivery rose $17.50 to settle at $1,216.70 an ounce. Gold often is considered a less risky investment during volatile economic times.
In other metals trading, September silver added 16.3 cents to $18.065 an ounce; December copper gained 3 cents to $3.3055 a pound; October platinum rose $11 to $1,531.60 an ounce and September palladium rose $6.35 to settle at $471.05 an ounce.
Oil and other energy contracts lost ground amid concerns about slowing global consumer demand for energy products.
Benchmark crude for September delivery fell $2.28 to settle at $75.74 a barrel on the New York Mercantile Exchange.
In other Nymex trading in September contracts, heating oil fell 7.37 cents to $2.0015 a gallon; gasoline dropped 4.28 cents to $1.9548 a gallon and natural gas fell 3 cents to $4.296 per 1,000 cubic feet.
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