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Wheat gains on global drought concerns

Corrects pricing for soybean futures.

CHICAGO (MarketWatch) -- Buoyed by stabilizing corn prices and concerns over international supplies, wheat futures gained Friday.

December wheat (WZ2) , the most active contract, rose 13 cents, or 1.5%, to $8.94 a bushel on the Chicago Board of Trade, limiting a weekly loss to 0.8% and extending quarterly gains to 15%. Front-month September wheat (WU2) gained 13 cents, or 1.5%, to $8.74 a bushel.

December corn (CZ2) edged back less than a penny to $8.07 a bushel, while the front-month September contract (CU2) gained a penny to $7.98 a bushel.

Wheat's gains come at a time of crisis for Midwest farmers. Seventy-eight percent of the contiguous United States is experiencing moderate to exceptional drought conditions, according to the National Drought Mitigation Center at the University of Nebraska-Lincoln. July was the hottest month on record for the U.S.

Wheat farmers across the world are experiencing similar difficulties. Russia is considering restricting its wheat trade, noted analyst Jason Britt of Central States Commodities in Kansas City, Mo.

However, Russia's agricultural minister on Friday ruled out a ban on grain exports from the country, where a drought has also reduced forecasts for the wheat harvest, according to Reuters. Russia is the fourth-largest producer of wheat, according to the Food and Agriculture Organization of the United Nations.

Yield estimates for Australia, the seventh-largest producer of wheat, have also dropped due to dry weather. These conditions make U.S.-grown wheat more attractive to both the international and domestic markets, said Britt. The U.S. is the third-largest producer of wheat.

Corn prices have begun to stabilize around $8 as harvest-time nears, providing a floor for higher wheat prices.

"Wheat has more nutritional vale than corn so, at the same price, livestock feeders will buy wheat," said Mitch Kasper, managing principal with Midwest AG Investors, in an email interview. "The corn price has stabilized here at around $8 so this may be the wheat market catching up to the new price reality."

If corn is significantly cheaper than either wheat or soybeans, farmers will only buy corn to feed their herds, he noted.

September soybeans (SU2) , the front-month contract, also gained Friday, tacking on 15 cents, or 0.9%, to $16.71 a bushel. November soybeans (SX2) , the most-active contract, added 20 cents, or 1.3%, to $16.46 a bushel.

Kasper said that soybean's gains may be due to investor worries about the harvest.

"The picture on beans is starting to come into focus," he said. "People are seeing that the corn crop is as bad as advertised and might be anticipating the same for beans."

However, Kasper doesn't think soybeans will face yield cuts as severe as corn.

"I still think beans yields will outperform corn, but this year that's not saying much," he said.