U.S. grains: Wheat hits one-month high on Black Sea political turmoil

Chicago | Reuters –– U.S. wheat rose to a one-month high on Wednesday as renewed political conflict in the Black Sea grain export region and worries about European crop quality prompted investors to cover short positions, traders said.

Corn and soybeans followed wheat higher.

At the Chicago Board of Trade, wheat for September delivery settled up 15-1/2 cents at $5.68 per bushel after reaching $5.72, the contract’s highest since July 7 (all figures US$).

CBOT September corn settled up seven cents at $3.63-1/4 a bushel and benchmark November soybeans ended up 14-1/4 cents at $10.80/bu.

Wheat extended early gains after NATO said Russia had massed around 20,000 combat-ready troops on Ukraine’s border and could use the pretext of a humanitarian mission to invade.

Both Russia and Ukraine are major wheat exporters, and investors have been watching for any disruption in shipments.

In a sweeping response to Western sanctions imposed over its support for rebels in Ukraine, Russia’s state news agency said Moscow will ban all imports of food from the U.S. and all fruit and vegetables from Europe. Moscow is the second-biggest importer of U.S. poultry. [Related story]

“This the first time the world trade has been pulled into this whole situation. When there’s uncertainty, the market reacts,” said Shawn McCambridge, grains analyst with Jefferies Bache in Chicago.

“With (CBOT wheat) being oversold and pushing these prices down the last couple months, it triggers short covering in case something does happen in that region,” McCambridge said.

Commodity funds hold a sizeable net short position in CBOT wheat.

Additional support stemmed from worries that rain damage to mature crops in France, Germany and Ukraine may downgrade quality and limit global stocks of food-grade wheat, potentially boosting export demand for U.S. supplies.

“The quality downgrades in Western Europe and Ukraine show that the food side of the balance sheet is still tighter than what the market is indicating from the price perspective,” said Paul Deane, agricultural commodity strategist at ANZ.

Gains in corn and soybeans were limited by good weather in the U.S. Midwest and expectations that the U.S. Department of Agriculture will raise its estimates of both crops in a monthly report next week.

Beneficial rains are expected in west-central and southern areas of the Midwest through the weekend. “The rains should significantly improve moisture as well as crop conditions for soybean growth,” MDA Weather Services said in a note to clients.

— Julie Ingwersen is a Reuters correspondent covering crop commodity markets from Chicago. Additional reporting for Reuters by Chrsitine Stebbins in Chicago, Michael Hogan in Hamburg and Naveen Thukral in Singapore.

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