Wheat prices on Friday gave back early gains, amid a spate of pre-weekend profit taking, encouraged by a row back by Russia on the terms of its ban on exports
Chicago wheat for September stood at $7.25 � a bushel at 17:45 GMT, down 7.6% at the lowest permitted by exchange rules. In earlyt deals the contract had set a fresh 23-month high of $8.41 a bushel, approaching limit up.
In Europe, November wheat ended 6.3% lower at E209.50 a bushel in Paris and down 3.8% at �152.00 a tonne in London, well below the two-year highs set on Thursday after Russia banned grain exports amid the country's worst drought on record.
The restrictions have, besides bringing wild swings in wheat prices, stoked concerns worldwide over food inflation, and sent shockwaves into many other markets, hitting shares in crop consumers such as Carlsberg and lifting stock in fertilizer groups, which stand to gain if farmers ramp up sowings.
'Stocks sufficient'
However, concerns the withdrawal of the world's third-biggest wheat exporting country from trade eased after Russia's deputy prime minister Igor Shuvalov said that the ban would be reviewed after the harvest set in, adding that the country remains committed to its long-term obligations.
On Thursday, the ban was announced as stretching from August 15 to the end of the year, a duration which attracted criticism from the influential Russian Grain Union lobby group as being too long.
Furthermore, a series of observers questioned the sustainability of wheat's rally when the grain is still in ample supply, with the Canadian Wheat Board, the top seller of the grain, saying that a problem with crops in Argentina or Australia needed to emerge to "sustain" prices.
"A sustained rally is most likely to occur only through a tightening of the US wheat supply and demand balance," the CWB said.
"While US exports are above last year, they have yet to demonstrate the strength necessary to significantly erode the huge wheat surplus."
Gleadell, the UK grain merchant said that selling into the rally "surely makes sense", noting the relatively low price of corn, which was cheaper than wheat by more than E20 a tonne in the European Union.
More crop problems needed
Rabobank analysts cut their forecast for the world wheat crop to 644.2m tonnes, some 17m tonnes below the last US Department of Agriculture forecast, to reflect the losses in Russia and other Black Sea states.
Nonetheless, echoing the CWB, the bank warned that export supplies from other wheat exporters "look sufficient to make up for the Russian shortfall".
"Without further bullish news to support current momentum, we expect wheat values to ease."
Some traders asid that profit-taking was only to be expected after a week in which gains in Chicago had topped 25% this morning.
"After a sharply higher week and improving US weather outlook [one] would anticipate some profit taking to develop during the session," Benson Quinn Commodities said.
'No sign of a top'
However, there were pockets of a support that price rises would return next week as end buyers, caught out by the grain's sudden rally, scrambled to replenish silos.
Richard Feltes at MF Global said there was "no sign of a top as yet", adding that "wheat end users are still short and at risk for further price gains".
Traders reported a series of rumours of contract defaults following Russia's ban, which allowed traders to claim force majuere and walk away from deals without legal comeback.
While Russia's ban does not kick in until August 15, Valars, the Russian trading house, said it would cancel even earlier shipments for fear that customs hold-ups would delay them beyond the cut-off date.
Demand switch
Commerzbank pointed to the pick-up in demand for European Union and US wheat exports.
Official data showed that the US sold 855,000 tonnes of wheat for export last week, 61% above the recent average, while the EU granted export licences for 312,000 tonnes, 35% more than average.
"Thus, wheat prices remain well supported," the bank said.
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