Wheat prices end July with huge monthly gain

Wheat prices surged in July by the biggest amount in more than a half century as severe drought conditions in Russia and other former Soviet republics destroyed grain crops.

If the gains continue, U.S. shoppers could see a bump up in prices of cereals, breads and pastas made with wheat. American wheat farmers, meanwhile, are going to get a boost in income, said Scott Irwin, professor of agriculture at the University of Illinois, Urbana-Champaign.

Wheat prices have risen $1.97 a bushel, or 42 percent, this month and are at their highest level since September 2008. Its the biggest gain for wheat contracts according to records dating back to 1959, according to the Chicago Board of Trade.

With no immediate end in sight for the drought in Russia, wheat prices could continue to rally. That makes it more likely that the surging wheat could wind up affecting prices for bread, said Ephraim Leibtag, an economist with the USDA's Economic Research Service.

The lack of rain and extreme heat in Russia has already destroyed about 20 percent of the country's grain crop in key growing regions, according to Russian officials. Russia is a major exporter, but analysts say there are rumors that the country may cut off its exports, boosting demand for the remaining grain stocks in the U.S. and other major grains producers.

Droughts are also afflicting Kazakhstan and parts of Ukraine, while heavy rains have damaged the Canadian wheat crop. The Canadian Wheat Board estimated that the 2010-11 yield would be the lowest since 2002 because about 13 million acres were either left unseeded or destroyed by heavy rains.

Expectations for a global wheat crop smaller than last year's helped propel prices for wheat up by 5.4 percent on Friday alone. September wheat rose 34 cents to settle at $6.615 a bushel.

Other grains prices also rose. September corn contracts jumped 13.5 cents, or 3.6 percent, to settle at $3.9275 a bushel and November soybeans added 17 cents to $10.05 a bushel.

"Undoubtedly this will be good news in Nebraska, out there in the West, on the Great Plains," Irwin said. If farmers switch acreage from soybeans and corn to wheat, that could also drive an increase in the price of those commodities as supply shrinks, ultimately leading to higher meat prices for livestock producers and shoppers, he said.

Metals and energy prices also rose Friday. Gold for December delivery rose $12.70 to settle at $1,183.90 an ounce, while October platinum rose $13.40 to $1,576.80 an ounce. In metals for September delivery, copper gained 2.15 cents to settle at $3.3115 a pound and silver added 38.6 cents to $18.003 an ounce.

Benchmark crude for September delivery rose 59 cents to settle at $78.95 a barrel on the New York Mercantile Exchange.

In other Nymex contracts, natural gas for September delivery rose 9.6 cents to settle at $4.923 per 1,000 cubic feet. September heating oil rose 1.85 cents to settle at $2.0881 a gallon.