The Russian declaration of a ban on grain exports that takes effect on Aug. 15 and extends at least through the end of the year jolted U.S. and world wheat markets, pushing wheat futures prices in Chicago, Kansas City and Minneapolis near or even above $8 a bu (the Chicago December and March futures settled above $8 on Aug. 5) for the first time in two years. Profit-taking on Friday pared the week’s gains, but the advance nonetheless was breathtaking and extended an astounding rally in wheat futures that began in mid-June.

Russian Prime Minister Vladimir Putin announced the ban saying, “I think it advisable to introduce a temporary ban on the export from Russia of grain and other agricultural products made from grain.” The ban was not unexpected. For several days there were rumors Russia would embargo grain sales as it became clearer the most severe drought in decades was exacting a heavy toll on the nation’s grain production.

The International Grains Council on July 29 forecast Russian wheat production this year at 50 million tonnes, down 7 million tonnes from its June projection and compared with the U.S. Department of Agriculture’s July projection at 53 million tonnes and the 2009 Russian outturn of 61.7 million tonnes. The private U.S. and world crop analyst Informa Economics on Aug. 5 estimated the 2010 Russian crop at 49 million tonnes. The U.S. Department of Agriculture will issue revised world wheat supply-and-demand estimates on Aug. 12, which will include adjusted numbers for Russia and other drought-afflicted nations including Kazakhstan and Ukraine.

The Russian grain export ban drew into question the fate of export contracts entered into by Russian exporters and foreign buyers. Exporters sought to load out as much wheat as possible before the Aug. 15 deadline. Indications were some contracts already were being canceled.

Regardless of the disposition of individual existing contracts, the Russian export ban was expected to shift additional foreign wheat demand to the United States. The U.S.D.A. on July 9 forecast U.S. wheat exports in 2010-11 at 1 billion bus. The trade anticipated the Russian action may increase U.S. wheat exports by 150 million to 200 million bus.

“Obviously, there’s an opportunity for us to help fill the gap with Russia in the case of wheat and China with respect to corn,“ U.S. Trade Representative Ron Kirk said in an interview with CNBC. “Whether we know it’s a long-term opportunity or just one of filling a temporary gap, it still is good news for America’s farm and agricultural interests.”

Those in the United States who buy wheat for milling and flour for baking were less sanguine in their reactions as they confronted volatile markets and prices no one had foretold as this season began.