A mild winter led farmers to plant a record amount of wheat to take advantage of the additional planting time. But as rains have come short in major growing regions of Russia, the U.S. and Australia, analysts are projecting the largest drop in expected supplies since 2003.
Markets are significantly more sensitive to the recent developments since the 2010 droughts in Russia that forced reductions in wheat exports.
"In 2010, everyone was talking about dryness in Russia even in May, but no one was paying attention," Chris Gadd, an analyst at Macquarie Group Ltd., told Bloomberg. "Because you’ve had the history of 2010, people are going to the other extreme and overreacting a little. If weather conditions deteriorate further, production estimates could go a lot lower."
At 9:37 a.m. Thursday, wheat futures rose 1.42 percent to $6.9625 per bushel, an increase of 9.75 cents per bushel.
Reuters reports that the some investors are likely to shift some of their investment in wheat toward corn, in response to these conditions.
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