Wheat Falls as Russia, Ukraine Increase Production Estimates

By Tony C. Dreibus

Oct. 1 (Bloomberg) -- Wheat fell on speculation that production will jump in Russia and Ukraine, creating a glut of grain and reducing demand for supplies from the U.S., the world's largest exporter.

Russia, the fourth-biggest producer, yesterday forecast a 27 percent increase in its grain harvest, including wheat, to 104.1 million metric tons. Ukraine said today its farmers will harvest 49 million tons of grain, up 69 percent from last year. The price of wheat is down 24 percent this year, partly on increased global supplies.

``Russian and Ukraine production is much higher than what they've reported so far,'' said Louise Gartner, owner of Spectrum Commodities in Beavercreek, Ohio. ``Russia has made great strides in not only production, but quality and export facilities. People aren't prepared for the onslaught of Russia.''

Wheat futures for December delivery fell 10.25 cents, or 1.5 percent, to $6.6975 a bushel on the Chicago Board of Trade. The price has lost half its value since reaching an all-time high of $13.495 on Feb. 27, touching a 13-month low of $6.4775 yesterday.

Global output of the grain will reach a record 676.3 million tons in the year ending May 31, the U.S. Department of Agriculture estimates.

Russia is expected to tie with Australia as the third- largest exporter of the grain in the 12 months ending May 31, the USDA said in a report on Sept. 12. Russia will produce 60 million tons, trailing China, India and the U.S., USDA data show.

`Feel the Pain'

``Russia has the infrastructure to be a force in major wheat production,'' Gartner said. ``When they have good crops, you feel the pain. It doesn't matter what the price is. They will be the lowest-priced seller. So what if we're seeing $6 in wheat? They'll beat us.''

Egypt, the world's largest importer of the grain, said it bought 325,000 metric tons from Russia in tenders on Sept. 17 and Sept. 25.

Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007, behind corn, soybeans and hay, government data show.

To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.