August 8, 2010

Heat waves are common in the fertile wheat belt stretching from Siberia to the  Black Sea. As such the wheat market pays attention to the droughts in Russian wheat belt.   Droughts develop slowly, and in general, markets tend to discount them rationally. News last week of  a  heat wave  in Russia    was unique in the sense that the prices acted as though the news was a surprise.

Wheat prices in Europe have been rising for six weeks, but in Chicago they caught fire only last week hitting a high of $8.41 a bushel —   a 25% rise in a week. Prices of other grains from   barley to soybean also jumped on the theory   that other grains will be used as alternative livestock feed.