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Wheat Hits 7-Month High on Hopes for Sales to Russia

September 7, 1994

Undated (AP) _ Wheat futures prices leaped to a seven-month high Wednesday on the Chicago Board of Trade as the likelihood of renewed wheat sales to Russia stoked buying interest.

Wheat futures have risen for six straight days on resurgent export demand linked to tight world supplies.

″The United States is evidently the only one that has any wheat,″ said Joel Karlin, research analyst with Kemper Securities Inc. in Chicago. He said the prospective Russian demand ″is just adding fuel to the fire.″

Most corn futures also rose while oats and soybeans retreated. On other commodity markets, cattle futures sank beneath hefty supplies; precious metals were boosted by inflation fears; and crude oil advanced on stronger demand signals.

The Commodity Research Bureau’s index of 21 commodity prices, regarded in financial markets as a rough barometer of inflation, rose 1.01 points to 234.23.

Wheat futures opened modestly higher and strengthened throughout the day as reports flowed back from Agriculture Secretary Mike Espy’s meeting in Moscow with Russian officials.

Wheat for September delivery rose 6 cents to $3.76 a bushel, the highest daily settlement for near-term deliveries since Feb. 14. September corn ended unchanged at $2.26 1/2 a bushel; September oats fell 1/2 cent to $1.23 a bushel; September soybeans dropped 1 cent to $5.88 1/2 a bushel.

Russia effectively was blocked from buying U.S. wheat in early 1993, when the U.S. Agriculture Department suspended it from an export credit program because it had defaulted on U.S.-backed loans.

On Tuesday, the USDA extended $20 million in loan guarantees to private Russian banks for purchases of U.S. agricultural products. Espy said the Russian government was eligible for export credits, too.

In a telephone news conference, Espy said Russia had caught up on its loan payments and he felt ″very comfortable″ with its creditworthiness. He said there were indications the country would want to buy wheat.

Separately, U.S. and Russian officials signed a deal allowing about 400,000 metric tons of U.S. wheat to be shipped to Russia, using $86 million remaining from a 1993 loan program.

Russia could need as much as $500 million in new U.S. loan guarantees to import wheat and other agricultural commodities, said Nelson Denlinger, executive vice president of U.S. Wheat Associates, the market-development arm of the National Association of Wheat Growers in Washington.

Gregg Dowd, the group’s market analyst, scoffed at the Russian government’s projection for a Russian wheat harvest of 92 million to 96 million metric tons.

″The Russian grain crop will be somewhere between 80 million and 84 million tons,″ Dowd said. ″They’re going to need wheat, that’s the bottom line.″

Wheat futures also were buoyed by the USDA’s announcement that Egypt bought 650,000 metric tons of U.S. wheat at subsidized prices. Egypt was bidding for another 800,000 metric tons. Algeria, Yemen and Pakistan also were seeking U.S. wheat.

Cattle futures fell sharply on the Chicago Mercantile Exchange on signs that retail beef purchases for the Labor Day weekend were lower than expected, leaving meatpackers with excessive supplies of beef and cattle.

October live cattle tumbled 1.18 cents to 70.37 cents a pound; September feeder cattle fell 0.78 cent to 74.87 cents a pound; October live hogs slipped 0.05 cent to 39.02 cents a pound; February frozen pork bellies fell 0.17 cent to 42.20 cents a pound.

Inflation fears and increased industrial demand for precious metals lifted gold and silver futures on New York’s Commodity Exchange.

October gold rose $2.20 to $391.40 a troy ounce; September silver rose 3.4 cents to $5.50 a troy ounce.

Crude oil futures rose strongly on the New York Mercantile Exchange after the International Energy Agency reported an increase in implied third-quarter demand for OPEC crude.

October light sweet crude rose 19 cents to $17.81 a barrel; October heating oil rose 0.12 cent to 50.07 cents a gallon; October unleaded gasoline fell 0.34 cent to 48 cents a gallon; October natural gas rose 3.5 cents to $1.631 per 1,000 cubic feet.

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