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Grains rally on Russia news

09/21/2012 @ 7:50pm

U.S. wheat futures rallied Friday, boosted by signals from Russia that it may consider limits on grain exports, which could elevate demand for the American crop.

Wheat for December delivery rose 17 3/4 cents, or 2%, to $8.97 1/4 a bushel at the Chicago Board of Trade.

Wheat buyers were energized by optimistic outlooks for increased export demand associated with a possible cutback in Black Sea-region exports. U.S. wheat exports have suffered this year due to increased competition from lower-priced Russian wheat.

The optimism about exports stemmed from comments by Russia's economic minister that the country may limit grain exports this autumn if domestic prices rise sharply.

"The question of shutting off the export of grain is one of the dynamics of the domestic price for grain. Given such trends, it's entirely possible that the government will decide to limit exports," Russian Economy Minister Andrei Belousov said Friday, according to Russian news wires.

Wheat futures climbed to a five-week high last week, boosted by speculation that drought conditions in Russia might force the country to reduce grain exports. But wheat failed to sustain the gains on denials by the Russian government of any export restrictions.

The talk Friday of a potential export cut by a Russian official gives more credibility to traders' assumptions, said Dan Manternach, senior economist with agriculture-advisory firm Doane Advisory Services in St. Louis.

"The market desperately needed to see some news that makes [the U.S. Department of Agriculture] not look too overly optimistic on their U.S. export projections," Mr. Manternach said.
The U.S. wheat export pace is currently running 200 million bushels below the level needed to meet the government's current forecast, Mr. Manternach said.

However, conflicting comments by another Russia government official raised uncertainty Friday about the prospects for export curbs by the big wheat-producing country.

"Government policy remains the same--no limiting measures for the agricultural market will be taken," Russian Deputy Prime Minister Arkady Dvorkovich told reporters Friday. Mr. Dvorkovich has repeatedly rejected the idea of reductions in grain exports.

But the talk of export restrictions provided new fodder to keep traders enthused, said Shawn McCambridge, senior grains analyst with Jefferies Bache in Chicago. "It was enough to pull people into the market on longer-term demand hope," Mr. McCambridge added.

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