Wheat Rises On Ukraine Supply Worries

KIEV, Ukraine -- Wheat prices rose after Ukraine said it may run out of supplies for export next month, fueling hopes for increased demand for the U.S. crop.

Farmers in Oklahoma plant wheat last month.

Soft red winter wheat for December delivery, the front-month contract, gained four cents, or 0.5%, to $8.725 a bushel at the Chicago Board of Trade on Friday. 

Ukraine, one of the world's largest wheat exporters, said it could run out of exportable stocks of the grain about the middle of next month.

The country has contracts to ship a total of 5.4 million metric tons of wheat in its current crop season, a figure that already accounts for the country's total surplus that could be used for exports, Ukraine First Deputy Agriculture Minister Ivan Bisyuk said in a statement on the ministry's website.

A drought over the summer in Europe's Black Sea region damaged crops, including wheat in Ukraine and Russia.

The reduced supplies have led analysts to speculate for months that the countries could move to limit grain exports, as Russia did in 2010 after a drought and wildfires.

Ukraine's announcement could boost U.S. export sales that have been lackluster for weeks, analysts said.

The U.S. is the world's largest wheat exporter.

"It obviously increases our chances for export sales," said Louise Gartner, an analyst with brokerage Spectrum Commodities in Beavercreek, Ohio.

"At this point, you're not going to see any more offers out of Ukraine."

Ms. Gartner said the U.S. still would face competition from European wheat exporters, but the U.S. and Canada would have an advantage with buyers seeking high-protein varieties of the grain used in bread and other baked goods.

World wheat supplies that traders viewed as excessive just a year ago have started to shrink due to inclement weather, ranging from dryness in the Black Sea area and Australia to heavy rains in Argentina.

Traders are also worried about dry soil slowing the development of a new U.S. wheat crop in the Great Plains.

The range of threats to production in big exporting countries drove wheat prices higher over the summer and has kept them high since then.

On Friday, wheat settled down 7.5% from its four-year closing high reached July 20.

The U.S. Department of Agriculture estimates world wheat production this year will fall 6.1% from last year, to 653.05 million metric tons.

Wheat exporters from the Black Sea region repeatedly undercut the prices of U.S. wheat exporters last month.

Buyers, including Egypt, the world's top importer of wheat, bypassed U.S. wheat supplies because they were too expensive.

The drawdown in Black Sea wheat supplies highlighted hopes that U.S. exports could pick up again soon.

Traders have said U.S. wheat exports are running behind schedule to meet the federal government's export forecast for this marketing year, which ends next May.

Also, the USDA on Friday said that private exporters reported export sales of 230,000 metric tons of wheat for delivery to buyers that weren't identified.

"That uptick in export demand is a big thing because exports have really been quite disappointing," said Doug Houghton, an analyst at Brock Associates, a commodity advisory firm in Milwaukee.

Source: The Wall Street Journal