Reuters — U.S. wheat futures surged nearly five per cent On Monday, the most in 1-1/2 years, as tensions in Ukraine stoked fears of disruption to shipments from the Black Sea, one of the world’s key grain-exporting zones.
Corn futures jumped 1.5 per cent at the Chicago Board of Trade after Ukraine, a major exporter of wheat and corn, called up army reserves on Sunday and Washington threatened to isolate Russia economically after President Vladimir Putin declared he had the right to invade his neighbour.
The political jitters sparked buying by speculative investors, despite assurances by Ukraine’s new agriculture minister that the political turmoil will not reduce spring sowings.
Most-active CBOT May wheat finished 29-1/4 cents higher at $6.31-1/2 per bushel, earlier hitting the contract’s highest price since Dec. 19 and notching the largest daily gain since July 2012 (all figures US$).
CBOT May corn jumped seven cents to $4.70-1/2, highest since Sept. 30.
Investment funds bought 18,000 wheat contracts and 20,000 corn contracts, trade sources said. That is the biggest purchase of wheat contracts by funds since at least 2011, according to Reuters data.
“The market is not reacting to new fundamental factors, but is being driven by investment funds that are short and that are reacting to a geopolitical context of uncertainty,” said Michel Portier, head of grains consultancy Agritel.
Speculative investors, including hedge funds, maintained their net short stake in CBOT wheat futures while the investors switched to a net long position in corn futures, U.S. regulatory data showed last week.
The U.S. Department of Agriculture forecasts that Russia and Ukraine will export a total 26.5 million tonnes of wheat in the 2013-14 marketing season, or 17 percent of global shipments. In corn, Ukraine alone is forecast to export 18.5 million tonnes, or 16 per cent of total exports.
But analysts and traders said there were no signs so far of actual disruption to trade and that the market was reacting nervously to risks raised by the weekend’s tense developments.
“When you have a major supplier looking a little less reliable, what it really creates is volatility. (Investors) are short and everyone wants to get out at once,” said Tim Emslie, research manager at CHS Hedging Inc. in Minneapolis.
Wheat was further supported by concerns that parts of the dormant hard red winter wheat crop in the southern U.S. Plains could have been damaged by freezing temperatures and less-than-expected snowfall.
Larger-than-expected U.S. export inspections for wheat and corn were also bullish.
However, the higher grain prices also triggered sales by U.S. farmers, who sold portions of their corn and soybean harvests from last autumn.
“I think there has been some pretty good movement today,” said Roy Huckabay, analyst at brokerage the Linn Group in Chicago.
Soybeans, which last week rallied to a five-month high, were also pressured by export inspections that fell below analysts’ expectations, pressuring futures.
CBOT May soybeans reversed earlier gains to ease 4-3/4 cents to $14.09-1/4 per bushel.
— Michael Hirtzer reports on ag commodity markets for Reuters from Chicago. Additional reporting for Reuters by Julie Ingwersen in Chicago, Gus Trompiz and Valerie Parent in Paris, Manolo Serapio Jr. in Singapore and Colin Packham in Sydney.