A powerful rally in wheat prices took a break Tuesday, receding from a nearly 2-year high after surging 62 percent since early June.
Prices rose nearly 5 percent on Monday after jumping 42 percent in July alone, the biggest monthly gain in at least 51 years, as a severe Russian drought destroyed one-fifth of Russia's wheat crop. Forecasters predicted more hot weather for the next 10 days Tuesday, said Richard Feltes, senior vice president and director of commodity research for MF Global in Chicago.
"We've had a heck of a rally in wheat," Feltes said. "The news ... was getting a little bit stale."
Feltes still thinks that as long as hot weather continues to decimate the Russian wheat crop, the U.S. wheat rally could continue through August.
Feltes said he doesn't expect an upswing in wheat similar to the record-setting 2007-2008 wave, when the price for a bushel jumped above $13 at one point, because the global wheat supply is much larger now, even if 20 million tons of wheat from Russia are lost.
Russia is a major wheat exporter. The heat that has ruined 20 percent of its crop so far could lead the country to curb or stop its exports, analysts say.
Estimates from Russian grain growers' unions and economists range from a 30 percent to 44 percent drop in exports this year from 2009.
Wheat for September delivery slipped 13.25 cents, or 1.9 percent, to settle at $6.80 a bushel Tuesday. Prices rose above $7 a bushel Monday for the first time since September 2008.
Prices rose 62 percent through Monday during a nearly two-month rally that began on June 9.
Other grains prices were mixed Tuesday. September corn contracts slipped 1 cent to settle at $3.895 a bushel, while September oats fell 1.5 cents to $2.75 a bushel and November soybeans added 8 cents to settle at $10.18 a bushel.
Industrial metals lost some ground after the Commerce Department said Tuesday that factory orders dropped 1.2 percent in June because of weaker demand for steel, construction machinery and aircraft. It was the second straight monthly decline.
October platinum dropped $15.10 to settle at $1,587.10 an ounce, September palladium fell $9.40 to $506.45, copper shed 3.1 cents to $3.3585 a pound but silver inched up 0.3 cent to settle at $18.422 an ounce.
Gold for December delivery, which is considered a safe haven investment and is more popular when investors become nervous about the strength of the recovery, rose $2.10 to settle at $1,187.50 an ounce.
Energy contracts mostly rose. Benchmark crude for September delivery jumped $1.21, or 1.5 percent, to settle at $82.55 a barrel on the New York Mercantile Exchange after rising 3 percent Monday.
In other Nymex contracts, natural gas for September delivery slipped 6.2 cents to settle at $4.639 per 1,000 cubic feet. September heating oil rose 4.62 cents to settle at $2.20 a gallon.
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