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Wheat buoys grains on export prospects

09/06/2012 @ 3:55pm

U.S. wheat futures surged Thursday, closing sharply higher on expectations that U.S. export sales are set to increase as supplies in the Black Sea run low.

Soft red winter wheat for September delivery at the Chicago Board of Trade ended up 26 1/4 cents, or 3.1%, to $8.72 a bushel.

The wheat market rallied in part on optimism about U.S. exports in the face of disappointing crops in Russia and the Ukraine, traders said.

Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, said Thursday it bought a total of 300,000 metric tons of Russian and Romanian wheat for shipment Oct. 21-31 and 175,000 tons of Ukrainian, Russian and Romanian wheat for delivery Nov. 1-10.

Persistent speculation that Russia may move to curtail grain exports has underpinned the market in recent weeks, although that has been offset by the near-term reality that U.S. exports have remained persistently weak.

Regardless of whether Russia actually restricts exports, many traders say that with disappointing crops, there will be little wheat available from the region by the fall, leaving the U.S. to help fill world demand.

Mike Zuzolo, president of Global Commodity Analytics and Consulting, added the prices of the Egypt purchase are not far below U.S. prices, meaning wheat here is becoming more competitive.

Still, Russia's continued sales, and the inability of the U.S. to win business, is troublesome for traders betting prices will climb, some analysts said.

"The place in the world that we're concerned about (Russia) is still underselling everybody else in the world," said Tregg Cronin, analyst with Country Hedging.

Concerns about dry weather hindering winter wheat planting in the central Plains also boosted the wheat complex. The weekly U.S. drought monitor Thursday reported extreme drought spread in Kansas and Nebraska, states that were bypassed by the remnants of Hurricane Isaac that dumped rain on areas further east.

Hard red winter wheat for September delivery at the Kansas City Board of Trade ended up 24 1/2 cents, or 2.8%, to $8.57 1/2. Minneapolis September spring wheat, meanwhile, ended up 15 3/4 cents to $9.29 1/4.

Corn futures also closed higher, following wheat, while soybeans were pressured by weakness in the cash market and a bigger-than-expected private U.S. crop estimate.

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