Wheat Plunges 6% in Chicago as Worst Russian Drought in 50 Years May Ease

Wheat plunged to the lowest price in almost two weeks on reports that Russia’s worst drought in at least 50 years is easing.

Temperatures will be lower this week and rain is forecast in the Volga district, the Federal Hydrometeorological Center said. Wheat prices in Chicago surged to a 23-month high on Aug. 6 after Russia announced it would ban grain exports and lowered its production estimate by as much as 38 percent as the prolonged dry spell damaged crops.

“It looks like the Russian drought is priced in,” said Jeff McReynolds, the owner of McReynolds Marketing and Investments in Hays, Kansas. “In order for wheat to keep going higher, we’ve got to have a weather problem somewhere else or the current problem has to last long enough that they can’t get next year’s crop going.”

Wheat futures for December delivery fell 44.25 cents, or 6 percent, to $6.90 a bushel at 12:54 p.m. on the Chicago Board of Trade, after touching $6.895, the lowest price since Aug. 3. Wheat dropped 2.8 percent last week, after surging 38 percent in July and touching $8.68 on Aug. 6, the highest level since Aug. 26, 2008.

Traders at the CBOT sold contracts on speculation that rain may fall later this week in central Russia, said Mike Zuzolo, the president of Global Commodity Analytics in Lafayette, Indiana.

“The European markets closed sharply lower because of rains in Russia,” Zuzolo said. “South of Moscow, toward the Black Sea, there’s not a lot of rain, but the trade discounted that.” Traders are saying that “the move was because of a chance for rain in the middle part of Russia,” he said.

Wheat is the fourth-biggest U.S. crop, valued at $10.6 billion in 2009, behind corn, soybeans and hay, government data show.