E-Malt.com News article: World: Wheat prices soar on fresh tensions in Ukraine

Wheat prices soared 4% as fresh tensions in Ukraine compounded concerns over dryness holding back the US winter crop, Agrimoney.com reported on April 14.

Monday, April 14 had been awaited with some anticipation by investors as it will bring, after the close of Chicago trading, the release of the first US Department of Agriculture assessment on progress of US corn planting, which has been slowed by cold and wet weather in the Midwest, particularly in eastern parts.

Kiev has threatened military action if the protestors failed to leave. However, Russia, which has a mass of troops in the east Ukraine border, has urged Kiev not to use force.

But the data event was overshadowed in early deals by the revival of concerns over the Ukraine crisis, after a deadline set by Kiev for pro-Russian activists to leave government buildings they are occupying in eastern Ukraine expired at 07:00 UK time (01:00 Chicago time).

With the assistant UN secretary general warning that Ukraine "teeters on the brink", the impact on grain markets, and in particular wheat, was predictable.

The Black Sea region is a huge source of wheat exports, with Ukraine the third-ranked corn exporter too, and there are concerns that the turmoil could affect production this year, as farmers are starved of credit, besides the threat of logistical hiccups and export curbs.

At Commonwealth Bank of Australia, Luke Mathews said: "This comes after Ukrainian security forces battled pro-Russian gunmen in the eastern Ukrainian town of Slovyansk over recent days.

"An escalation of the violence, and/or the implementation of more severe sanctions on Russia, has the potential to trigger a bout of financial market risk aversion.”

Agritel, the Paris-based consultancy with a Ukraine office, said: "This week, markets should be focused on Ukraine.

"Tensions remain strong, which creates new worries about shipping concerns and 2014 crop production."

At Phillip Futures, Vanessa Tan said: "Renewed tensions between Russia and Ukraine sparked off another round of concerns regarding wheat output in Ukraine.

"Furthermore, forecasts were released, reflecting possible further cold weather conditions in the US Plains", where drought has hurt the health of winter wheat seedlings.

"This would further worsen the conditions of the winter wheat crop which has already been experiencing declining crop ratings."

Weather has not been too favourable to corn plantings in the US. While there was rain over the weekend in some southern Plains areas that need it, "amounts were 0.10-0.50 inches", said weather service MDA, hardly a soaking.

It was cold too, with "snow amounts in western Nebraska, and Colorado 1-4 inches".

As an extra prop for prices, Taiwan purchased 92,550 tonnes of US wheat, in another sign of demand in the market after Egypt's 230,000-tonne order on April 11.

Indeed, Egypt's purchase is looking well-timed but, in being purchased solely from the Black Sea region, including Ukraine for the first time in three months, not entirely risk free.

Corn gained too, although less so, standing 1.0% higher at $5.03 ј a bushel for May, with attention more focused on the USDA planting progress data due later.

"Weather and corn planting progress is key," US Commodities said, quoting expectations that the data will show 4% of corn has been planted, compared with about 5% typically by now, although another survey quotes a figure of just under 3%, compared with an average of 7%.

Whatever, the outlook was hardly mega positive for farmers, with MDA noting that "scattered showers and cool temperatures will stall fieldwork this week" in the Midwest.

"Rain and snow showers, mostly rain, will favour southern and eastern crop areas this week," of up to 1.25 inches of rain and 3 inches of snow, MDA said.

In the Corn Belt, it is in the western areas, not the eastern ones, which actually need rain.

New crop December corn added 0.8% to $5.03 a bushel.

That was enough to make ground over new crop November soybeans, which added just 0.3% to $12.16 a bushel.

That reduced the soybean: corn ratio, viewed as a key indicator of which crop farmers will lean to in spring sowings programmes, to below 2.42:1, if a figure still in the oilseed's favour.

(The neutral ratio is generally reckoned at about 2.0-2.25:1, depending on who you speak to.)

Benson Quinn Commodities noted, on the demand side that while "the western [US] processor is said to have extended ownership this week on uptick in producer selling with Wednesday's contract rally highs, the eastern processor remains a firm bidder on tight pipelines".

Of course, the market remains overshadowed by the concerns over Chinese defaults on import orders.


16 April, 2014