WINNIPEG, Manitoba Wheat markets tumbled the daily limit on Friday, posting their biggest daily percentage loss in 14 months as investors took profits a day after pushing prices higher with Russia suspending grain shipments due to its worst drought in a century.
Traders were wondering "have prices gone up enough now to factor in the damage that has been done or are markets getting ahead of themselves?" said Dan Manternach, wheat analyst for Doane Advisory Services.
Chicago Board of Trade (CBOT) September and December wheat both fell by the maximum 60 cents, a day after finishing at the maximum daily gain. Front-month wheat futures fell 7.6 percent to $7.25-3/4 per bushel at 12:37 p.m. CDT (1:37 p.m. EDT). Minneapolis and Kansas City wheat also plunged near the daily loss limit.
"We didn't think it should have been this high anyway," said Joe Victor, analyst for Illinois-based research and advisory firm Allendale Inc.
Even after Friday's losses, the nearby contract remained on track for a weekly gain of nearly 10 percent.
Since prices bottomed on June 9 at $4.25-1/2 per bushel, wheat futures had gained 88 percent entering Friday's U.S. trading.
Chicago September corn prices fell 1.1 percent to $3.99 per bushel, following wheat lower amid profit-taking and hedge selling, while August soybeans slipped 0.1 percent to $10.54 per bushel.
Wheat prices remain well off the 2008 highs of $13.34-1/2 per bushel hit when fears of a global food crisis roiled the markets. World wheat ending stocks in 2007/08 were one-third lower than the 187 million tonnes projected in July by the U.S. Department of Agriculture.
The Paris-based Organization for Economic Development and Cooperation (OECD) said on Friday that the current situation is not comparable to the 2007/08 crop year.
While there is no world wheat shortage, it is too early to say the rally is over as the lingering Russian drought poses a threat to winter wheat planting in September, Manternach said.
Benchmark November milling wheat on Euronext was down 6.3 percent at 209.50 euros a tonne.
Russia will honor its current grain export obligations only after the harvest is completed and the crop situation is more clear, First Deputy Prime Minister Igor Shuvalov told Reuters on Friday.
"The statements (that) Russia will honor current contracts and will evaluate resuming exports after harvest I think takes a little pressure off these markets. People are starting to take profits and the question now is how much lower will it go," said Joe Bedore, CBOT floor manager for trade house FC Stone.
But traders cited concerns that Kazakhstan and Ukraine, also hit by drought, may also curb exports.
"There are doubts about the whole Black Sea zone," said one futures dealer.
Two global suppliers canceled deals to ship some 65,000 tonnes of Black Sea wheat to Bangladesh after Russia curbed grain exports, a Bangladeshi importer said on Friday.
"If you see a lot of exporters declaring force majeure, that is likely to spook the market a bit and if you see neighboring countries like Ukraine and Kazakhstan putting any similar export restrictions in place, I think that could add further fuel to the rally," Barclay Capital's Sudakshina Unnikrishnan said.
Force majeure clauses in supply contracts free firms from contractual obligations to deliver goods, with no penalty due to events beyond their control. They are often used in response to natural disasters.
Ukraine on Wednesday said it had no need at the moment to limit grain exports and traders said global trade rules may limit the ability of Russia's Black Sea neighbor to curb exports.
"Ukraine is a member of the World Trade Organization and has to be very careful about introducing export bans and export taxes," a trader said this week.
"They have apparently introduced different measures, they have introduced an unofficial ban on grain shipments by rail to ports and extra reinspections of grain cargoes after loading which makes their exports much slower."
Prices at 12:37 p.m. CDT (1737 GMT)
(Additional reporting by Sam Nelson, Svetlana Kovalyova, Gus Trompiz, Nigel Hunt and Bruce Hextall; Editing by David Gregorio)