Grain prices continued to explode this week, as Prime Minister Vladimir Putin announced a ban on Russian grain exports from August 15 through the end of 2010, leaving many buyers of Russian wheat in a state of panic to cover their needs. The exportation ban was enacted to attempt to preserve domestic supplies during Russia's worst drought in 30 years. Wheat prices for September delivery in Chicago have risen from a low of $4.42 per bushel just two months ago to hit a record contract high of $8.41/bu early Friday morning.
The Russian emergency ministry said more than 500 separate drought-related blazes were burning nationwide on Friday, many of them affecting fertile cropland in the western regions. Ironically, in neighboring Ukraine, the wheat crop was damaged by floods last month. The two countries together control more than a fifth of the world wheat trade.
Rising wheat prices have prompted bakers and producers of pastries, cereals, and breads to voice concerns about their costs. The price of wheat only accounts for a small fraction of the cost of producing the end product, however.
US wheat stockpiles are extremely robust as weather conditions have been much more favorable compared to Western Europe.
US weather for growing soybeans and corn has been very good on the average throughout the corn belt, causing yield predictions to remain very healthy.
Southern Soybeans growing regions, however, may suffer some heat stress during their pod-filling stage.
Following the surge in wheat prices Friday morning, Russian First Deputy Prime Minister Igor Shuvalov announced that Russia will honor Russian current export obligations despite the ban. This announcement caused an enormous downward break in the price of wheat from 8.41 to 7.31, the largest one-day swing in years.
Just as spillover buying helped US corn prices climb all week, Russia's promise to honor current export obligations pushed corn lower mid-morning Friday.