Unrest in Crimea, scene of the Charge of the Light Brigade,
caused some of a push in the grains complex on Monday.
Many markets tumbled as investors reacted with dismay to the
Russian occupation Crimea peninsula, and the ideas of a new cold war that it
has provoked, with Moscow and Washington already in a stand-off.
The crisis has "opened a new frontier of political and financial
risk for global investors", G+ Economics said.
"The potential for extended uncertainty means geopolitical
risk is back for global investors."
Major casualties included shares, which tumbled 1.5% in London, 2.7% in Paris and 3.4% in
Frankfurt, while standing down 0.9% on Wall Street in late deals.
Russia's Micex index fell 10.8%, its biggest fall since
actually gained a bit, as investors sought comfort amid uncertain times, but
particularly against the rouble,
which fell to an all-time low against the greenback, prompting Russia's central
bank to raise its benchmark interest rate.
But for some agricultural commodities, the crisis was
positive for prices, given that both Russia and Ukraine are major grains exporters.
"All eyes are on the Ukraine and Russia and the mounting
tension there and how that could affect grain exports out of the Black Sea
Region," Benson Quinn Commodities.
"Additional risk premium is being built into the wheat and corn markets, not only because of the potential disruption in
exports but this is also the time of year when Ukrainian farmers begin planting
their spring grains for the 2014 harvest."
Commerzbank said that "fears of delayed shipments are having
a serious impact given that several million tons of already-sold corn and wheat
in the country are still awaiting shipment.
"Many producers are now said to be withholding stocks to
safeguard themselves in case the Ukrainian currency should collapse," with
grains being dollar denominated, so offering a hedge against a falling hryvnia.
Highs set already?
Not that all observers were quite so bullish.
At Country Futures, Darrell Holaday noted "panic buying tied
to ideas that Ukraine wheat production and exports could be disrupted with this
invasion" of Crimea.
However, he added that "we don't anticipate any disruption
unless Russian troops move further west into Ukraine.
"As a matter of fact, the issues in Ukraine will likely make
the government more aggressive in marketing wheat to the world because they
At broker RJ O'Brien, Richard Feltes urged investors to "recall
that the price surge after Chernobyl nuclear meltdown eventually faded.
"I believe price action today is a case of algorithm [funds]
and technicians getting carried away. Highs for the week could be in."
Still, the Ukraine tension was not the only reason for
investors to buy grains.
Weekly US export data, as measured by cargo inspections,
were good for wheat, up 127,000 tonnes week on week at 610,000 tonnes, and
excellent for corn, up 240,000 tonnes at 1.04m tonnes.
Furthermore, there is date due later on Monday on the state
of the US winter wheat crop, which has been hurt by the country's cold weather.
But by how much?
Chicago wheat for May closed up 4.9% at $6.31 ½ a bushel, not
quite closing over its 100-day moving average for the first time in four
months. (Earlier, it exceeded the line easily, soaring 7% to $6.44 ½ a bushel,
the highest since early December.)
In Europe - which, thanks to geographical proximity, could
see its wheat exports benefit most from any disruption to former Soviet Union shipments
– Paris wheat for May matched a 2014 high, for a nearest-but-one contract, of E205.50
a tonne before losing some ground to end at E202.50 a tonne, a gain of 3.1%.
London wheat for May soared 3.4% to £162.00 a tonne.
'Buy in short
Back in Chicago, corn for May ended up 1.5% at $4.70 ½ a
bushel for May delivery, earlier soaring 4.2% to $4.82 ¾ a bushel, a five-month
high for the contract - taking the lot above its 200-day moving average, if
temporarily, for the first time in 14 months.
It could be argued, purely on Crimea concern grounds, that
corn should at least have kept up with wheat.
Ukraine is the third-ranked corn shipper, and with Russia
accounts for some 19% of world exports, according to the US Department of Agriculture.
In wheat exports, the pair have a market share of less than
However, what was in wheat's favour was the sizeable (if
shrinking) net short position that investors have in Chicago futures and
options, of more than 20,000 contracts as of last Tuesday.
For Chicago corn, funds had already moved back to a net long
position, of more than 87,000 contracts.
And one of the reasons grain prices soared so much on Monday,
as one major European commodities house noted, is that "the unrest has caused
many to buy in their short positions, or go longer, whilst the unrest remains".
This trend was not so helpful for soybeans, in which investors already have a large net long
position, of more than 200,000 contracts.
Indeed, given that this has been built in part on long soybean-short
grains bets, and grain shorts were being bought in, there was talk of the
oilseed suffering as spread positions were closed too.
US soybean exports, meanwhile, dropped by nearly 330,000
tonnes week on week to 984,181 tonnes.
(It has to be said that is hardly a disastrous figure,
taking the total for the first half of 2013-14 to 36.9m tonnes, and leaving
only 4.2m tonnes needed in the second half to meet the USDA forecast for the
Still, ideas over purchases by China, the top buyer, are
taking a bit of a knock, thanks to talk of negative crush margins and huge
stocks already at ports.
In fact, CHS Hedging noted that whole "China estimates their
February soybean imports at 5.05m tonnes, it expects March imports to fall to
China's currency is weakening too, in part thanks to the
broader jitter over emerging markets, but whatever "weakening their buying
power in the world market", the broker noted.
Soybeans for May eased 0.3% to $14.09 ¼ a bushel, pressed
too by a 1.6% tumble to $450.50 a short ton in soymeal.
Another big Brazilian crop, arabica coffee, did far better, soaring 7.3% to 193.45 cents a
pound for May delivery, after hitting 197.80 cents a pound earlier, the best
for a second-in contract in two years.
This after weekend rains proved disappointing in some areas
of drought-hit Minas Gerais, Brazil's top coffee-producing state,
"The lack of rain in coffee producing areas over the last
month has hurt coffee production potential as the crop was forming cherries," said
Jack Scoville, vice-president at the Price Futures Group.
"It could take a few months before the losses are truly
known as the next harvest will not begin until May."
The contract also gained from technical moves, after
managing to build on the 180-cents-a-pound mark taken in the last session.
"Provided prices can build on this level, near term targets
of 190 cents a pound are in sight provided momentum holds," Sucden Financial
said earlier in the day.
More buying to come?
Raw sugar, also
being supported by Brazil drought fears, gained too, adding 0.8% to 17.66 cents
a pound in New York for May delivery.
Given "uncertain" weather prospects in Centre South Brazil -
which produces 90% of the country's sugar and "the expected reworking of cane
figures for the up-coming harvest and a potential delay to the start of
crushing activity, it could be argued that the speculative community has more
buying to come", Sucden Financial said.
This after turning net long in raw sugar futures and options
in the latest week for the first time since before Christmas.
for May fell 1.3% to $2,918 a tonne in New York, with estimates on Friday from
the International Cocoa Organization for the world production deficit in
2013-14 seen as in line with expectations, and decent weather in Ivory Coast
spurring thinking of a smaller shortfall.