Bloomberg – Wheat prices rose for the first time in five sessions after the U.S. Department of Agriculture said global production will drop to a three-year low.

Worldwide output will fall to 645.7 million metric tons in the year that began June 1, the USDA said today in a report. Last month, the agency projected 661.1 million. The most-severe drought in at least 50 years in Russia and adverse weather in Canada and other producing countries damaged crops. Exports from the U.S., the leading shipper, will jump 36 percent, the USDA said.

“Supplies are getting tighter, and that means more pressure on producing big crops next year,” said Mark Schultz, the chief analyst at Northstar Commodity Investment Co. in Minneapolis. “We already have seen a rush of new demand.”

Wheat futures for December delivery surged 29 cents, or 4 percent, to $7.54 a bushel at 10:54 a.m. on the Chicago Board of Trade. The price slumped 11 percent in the previous five sessions, partly on bets that global farmers will increase acreage. On Aug. 6, the commodity reached a 23-month high of $8.68 a bushel.

Global production a year earlier was 680.3 million tons.

Russia, the world’s third-biggest producer, last week banned grain exports for the rest of the year to conserve supplies for domestic-food production and livestock feed. Flooding reduced the crop in Canada, the second-largest shipper.

–Editors: Patrick McKiernan, Michael Arndt

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

If you enjoyed this post then Subscribe to Savvy Investor via RSS