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Severe and persistent drought held southern Russia in its grip in June and July 2010. Low rainfall and hot temperatures damaged 32 percent of the country’s grain crops, said Russian Agriculture Minister, Yelena Skrynnik on July 23. This satellite vegetation index image, made from data collected by the Moderate Resolution Imaging Spectroradiometer (MODIS) on NASA’s Terra satellite, shows the damage done to plants throughout southern Russia. A previously published image of land surface temperatures shows extreme heat in the drought region at the same time. The vegetation index is a reflection of photosynthesis. The index is high in areas where plants are dense, with plenty of photosynthesizing leaves. The index is low when plants are thin or not present. This image is a vegetation index anomaly image that compares photosynthesis between June 26 and July 11, 2010, to average conditions observed in late June and early July between 2000 and 2009. Below-average plant growth is shown in brown, while average growth is cream-colored. If there had been above-average growth in the region, it would have been represented in green. The land around the Volga River is brown in this image. Plants throughout the region were stressed, producing fewer leaves and photosynthesizing less between June 26 and July 11, 2010. The image is speckled brown. In the large image, which covers a broader region in more detail than the web image, the dots are clearly fields of crops. Here, the dots blend together to reveal a broad region of drought-affected crops. The Volga region is one of Russia’s primary spring wheat-growing areas. The vegetation index values shown here were the lowest late-June values seen in Russia’s spring wheat zone since the MODIS sensor began taking measurements in 2000, said an analyst from the United States Department of Agriculture (USDA) Foreign Agricultural Service. Largely as a result of the drought, the USDA expected Russia’s overall wheat crop to be 14 percent smaller than in 2009. The drought affects more than Russian farmers. Russia is the world’s fourth largest wheat exporter. If Russia isn’t able to supply as much wheat, the world’s overall wheat supply will drop. With less wheat on the market, wheat prices will go up. As of July 23, wheat futures (the current price for wheat that will be harvested and delivered in September) had risen for four consecutive weeks because of the expected drop in supply of Russian wheat, reported Bloomberg.

Wheat prices have staged the most drastic rise in more than 50 years, as a drought in Russia fuels growing worries that it could lead to a global shortage of the grain. Harsh heat and a lack of rain in Russia have killed half of the crop in some hard-hit areas. The slump in production in one of the world's most fertile breadbaskets has pushed prices up 62% since early June, and last month saw the biggest and fastest increase since 1959.

High temperatures, which rose to a record 37.4 Celsius (99 Fahrenheit) yesterday in Moscow, have damaged 32 percent of land under cultivation and forced Russia to declare states of emergency in 23 regions. Grain prices may double this year because of the drought, according to the Grain Producers’ Union.

Inflation may quicken to 8.1 percent by December, compared with the government’s annual forecast of less than 6.5 percent, according to Yaroslav Lissovolik, Deutsche Bank AG’s head of research in Moscow. That will put pressure on the central bank to raise its benchmark rate by year-end for the first time since December 2008, said Natalia Orlova, Moscow-based chief economist at Alfa Bank, Russia’s biggest private lender.

Higher rates “may cause a correction in short-term sovereign bonds and, later, in long-term sovereign bonds,” said Evgeniy Nadorshin, senior economist at Trust Investment Bank in Moscow and an adviser to Economy Minister Elvira Nabiullina. The government, which plans to sell 1.2 trillion rubles ($39.3 billion) of bonds on the domestic market this year to finance its budget deficit, may increase that figure to pay for subsidies and contain the drought’s fallout, Nadorshin said.

Oil is not the only commodity that has been roaring ahead this year. Precious metals are in a major bull market as are corn, wheat, rice, and soybeans. In fact, while the fall in the dollar is part of the commodity futures bull markets story you can not get away from the fact that rapidly developing economies in a number of nations and changes in weather patterns caused by climate change are important factors in driving futures prices.

Russian President Dmitry Medvedev has declared a state of emergency in seven Russian regions because of wildfires fuelled by a heatwave. The death toll from the fires has risen to at least 34. The Russian emergencies ministry said 500 new blazes had been discovered over a 24-hour period, but most had been extinguished. Homes have been burnt in 14 regions of Russia, the worst-hit being Nizhny Novgorod, Voronezh and Ryazan. The state of emergency was announced in a decree that also restricted public access to the regions affected. Moscow is again shrouded in smoke from peat and forest fires outside the city. The fires, caused by record temperatures and a drought, have affected cereal harvests, driving wheat prices up.

Russians are bracing themselves for another week of high temperatures, with forecasts of up to 40C (104F) for central and southern regions. Officials also expect stronger winds in some regions, which will fan the flames. By Sunday night, wildfires were still raging across some 128,000 ha (316,000 acres).

Thousands of people have lost their homes and nearly a quarter of a million emergency workers have been deployed to fight the flames. President Medvedev described the situation on Saturday as a "natural disaster of the kind that probably only happens every 30 or 40 years". Moscow doctors say the elderly and toddlers should wear gauze masks outdoors.