By Tom Polansek
Of DOW JONES NEWSWIRES
CHICAGO (Dow Jones)–Wheat prices are expected to rebound from a sharp
sell-off on confirmation that global supplies of the grain will tighten as
Ukraine joins Russia in restricting exports because of a historic drought.
Ukraine’s agricultural policy ministry said Tuesday it would limit grain
exports to 3.5 million metric tons from now until the end of the year,
including 1 million tons that are already being held in ports. Of the 2.5
million tons left to be exported, 1.5 million will be wheat and 1 million will
be barley.
Prices neared two-year highs earlier this month after Russia surprised
traders by announcing it was halting grain exports for the rest of the year
because of damage from the drought, but they have since pulled back
significantly. The former Soviet Union is a major exporter on the world market
and its production problems have importers scrambling to secure wheat from
other countries, including the U.S.
Soft red winter wheat futures are called to open 10 to 12 cents per bushel
higher on the Chicago Board of Trade, according to traders. Wheat for September
delivery jumped 10 cents, or 1.5%, overnight to 6.73 3/4 a bushel, and wheat
for December delivery overnight rose 10 1/4 cents, or 1.5%, to $7.06 1/2.
The nearby September contract finished the overnight session down 20% from
its Aug. 5 high but up 58% from a nine-month low in June. A 5% slide on Monday
was seen as “short-term overdone,” a floor trader said.
Traders are waiting to see whether the decline in the amount of wheat
available in the world leads Egypt, the world’s biggest importer, to buy U.S.
wheat Tuesday. Egypt, which had been buying wheat from the former Soviet Union,
issued a tender for wheat after prices fell 5% at CBOT on Monday.
Egypt could buy U.S. hard red winter wheat, grown in the Plains and traded
at the Kansas City Board of Trade, because it looks competitive on the world
market, a trader said. The U.S. has plenty of wheat to sell, and a sale would
help fuel gains Tuesday.
In a sign of tightening global supplies, Bangladesh’s planned purchase of
300,000 tons of Russian wheat, approved four months ago, is effectively off to
differences on terms and conditions, a person familiar with the matter said.
Had the deal been implemented, it would have served as a cushion for
Bangladesh, which is now scrambling to cover its wheat needs.