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Wheat futures prices have surged since mid-June, soaring more than $1.30 a bu in the case of the Kansas City September contract. The rally in wheat markets reflected a retreat in the value of the U.S. dollar, advancing equity markets, traders covering short positions and mounting concerns about weather-related crop reductions in key wheat-exporting nations, particularly Canada and the former Soviet Union, which was expected to shift additional world demand to the United States and perhaps Australia. Those same crop concerns propelled European wheat futures to 13-month highs.

In its latest World Agricultural Supply and Demand Estimates issued on July 9, the U.S Department of Agriculture lowered its forecast for world 2010-11 wheat production by 7.45 million tonnes, to 661.07 million tonnes, with higher projections for the United States and China easily offset by lower forecasts for Canada, Russia, Kazakhstan and the European Union. Excessively wet weather during planting reduced wheat area in Canada, and the U.S.D.A. lowered its forecast for Canadian wheat production by 4 million tonnes, to 20.5 million tonnes. Severe drought reduced crop prospects in Russia and Kazakhstan. The Russian wheat production projection was lowered 4.5 million tonnes, to 53 million tonnes, and the Kazakh crop forecast was lowered 3 million tonnes, to 14 million tonnes. The winter wheat harvest was well under way in Russia and Kazakhstan, but it was expected production estimates for those nations may be lowered again.

Because of the production shortfalls, the U.S.D.A. lowered its forecast for Russian exports in 2010-11 by 2.5 million tonnes, to 15 million tonnes, lowered Kazakh wheat exports by 500,000 tonnes, to 8 million tonnes, and lowered Canadian exports by 2 million tonnes, to 15.5 million tonnes. In contrast, the U.S.D.A. raised its forecast for U.S. wheat exports by 2.73 million tonnes, to 29.75 million tonnes.