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Wheat prices rocket on Russia export ban

Wheat prices struck two-year highs this week as major exporter Russia banned grain exports after a record drought and fires ravaged its crop.

Markets shook off news that the US economy shed more jobs than expected in July. Some 131,000 jobs were lost and the unemployment rate remained stuck at 9.5 percent, the US government said on Friday.

The figures were seen as yet another sign that the US economic recovery was stagnating and that the jobs market may take years to get back on its feet.

GRAINS AND SOYA: Wheat prices soared in the wake of the decision by Russia — the world’s third biggest exporter — to ban exports until the end of 2010.

Wheat futures struck 7.89 dollars a bushel (about 25 kilogrammes) on Friday in Chicago trade — the highest level since late 2008.

“Concerns on the impact of drought on Russian wheat production … is dominating market focus,” said Barclays Capital analyst Sudakshina Unnikrishnan.

“Weather forecasts from Russia point to the continuation of drought and the market focus remains on Russian wheat export potential and how lowered supply prospects will feed into global wheat production and trade balances,” she added.

Russia has seen 10 million hectares (25 million acres) of arable land destroyed in the heatwave and the government has warned grain production this year will be lower than annual domestic demand at 70-75 million tonnes.

“It is going to interrupt trade and create instability in the market … a situation which was not serious has now become serious,” said Abdolreza Abbassian, economist and secretary of the Intergovernmental Group on Grains at the UN Food and Agricultural Organisation (FAO).

“It was a very quick and unexpected decision,” he told AFP in Rome.

Crucially, the government decree to ban exports also stated that the decision should be matched by its partners in a regional customs union, Belarus and Kazakhstan.

Kazakhstan is a major player on global grain markets and officials in Astana said its position could be made clear next week.

Analysts at Commerzbank said the United States could be a key beneficiary of the crisis.

“The US, in particular, might benefit from this, because it once again had a good wheat harvest and it also has sufficient wheat inventories,” they wrote in a research note.

By Friday on the Chicago Board of Trade, wheat for delivery in September had jumped to 7.69 dollars a bushel from 6.61 dollars the previous week.

Maize for December rose to 4.12 dollars a bushel from 4.06 dollars.

November-dated soyabean meal — used in animal feed — increased to 10.30 dollars from 10.05 dollars.

OIL: Crude oil prices rose sharply to three-month highs above 82 dollars, with sentiment boosted by soaring global stock markets, strong bank results and solid US economic data at the start of the week.

Traders meanwhile shrugged off downbeat economic news in China, which is the world’s second biggest energy-consuming nation after the United States.

“Oil prices ran higher on the expectation that improving economic conditions will bring about energy demand growth,” said Mike Fitzpatrick of MF Global.

But he warned that “financial markets can clearly run ahead of economic reality, as has been demonstrated time after time.”

By late Friday on the New York Mercantile Exchange, Texas light sweet crude for delivery in September had rallied to 81.91 dollars a barrel from 77.67 dollars the previous week.

On London’s Intercontinental Exchange, Brent North Sea crude for September jumped to 81.30 dollars compared with 77.04 dollars.

PRECIOUS METALS: Prices advanced across the board.

“The entire precious metals complex posted gains … as equity markets regained upward momentum, (on) positive macro data and the euro made further gains against the dollar,” said Barclays Capital analyst Suki Cooper.

By late Friday on the London Bullion Market, gold advanced to 1,207.75 dollars an ounce from 1,169 dollars.

Silver rose to 18.30 dollars an ounce from 17.66 dollars.

On the London Platinum and Palladium Market, platinum climbed to 1,571 dollars an ounce from 1,555 dollars.

Palladium increased to 491 dollars an ounce from 487 dollars.

BASE METALS: The price of tin topped 20,000 dollars a tonne for the first time since August 2008 — reaching a 23-month high of 20,900 dollars.

“The supply on the global tin market is tightening, in particular because of declining exports from Indonesia, the biggest tin exporter worldwide,” noted analysts at Commerzbank.

By late Friday on the London Metal Exchange, copper for delivery in three months jumped to 7,421 dollars a tonne from 7,225 dollars.

Three-month aluminium rose to 2,215 dollars a tonne from 2,134 dollars.

Three-month lead gained to 2,198 dollars a tonne from 2,050 dollars.

Three-month tin stood at 20,600 dollars a tonne from 19,540 dollars.

Three-month zinc increased to 2,136 dollars a tonne from 1,991 dollars.

Three-month nickel rallied to 22,140 dollars a tonne from 20,635 dollars.

COFFEE: Coffee futures dropped one week after striking a 12-year high in London on keen demand from speculative buyers.

By Friday on LIFFE — London’s futures exchange — Robusta for delivery in September stood at 1,727 dollars a tonne, down from 1,810 dollars.

On the New York Board of Trade (NYBOT), Arabica for September fell to 169.25 US cents a pound from 178.75 cents.

COCOA: Cocoa prices retreated.

By Friday on LIFFE, cocoa for delivery in September fell to 2,202 pounds a tonne from 2,279 pounds the previous week.

On NYBOT, the September cocoa contract dropped to 2,996 dollars a tonne from 3,070 dollars.

SUGAR: Sugar futures declined.

By Friday on NYBOT, the price of unrefined sugar for delivery in October decreased to 18.33 US cents a pound from 19.40 cents.

On LIFFE, the price of a tonne of white sugar for October fell to 543 pounds from 580 pounds.

RUBBER: Malaysian rubber prices increased.

The Malaysian Rubber Board’s benchmark SMR20 contract rose to 302.65 US cents a kilo from 290.85 cents.