So, Crimea voted to join Russia.
And the European Union is to discuss further sanctions
against Russia, with the US also warning Moscow of "costs" to its actions in
sponsoring the poll.
"There remains significant uncertainty about the future of
Crimea/Ukraine, and the market is likely to keep pricing in the tail risk of a
further escalation of the conflict until signs of a diplomatic solution
emerge," Barclays said.
But as of yet, there is an air of calm in the markets,
evident in small declines in Asian shares,
which fell 0.3% in Hong Kong and 0.4% in Tokyo, while rising 1.0% in Shanghai on
news that China's central bank had freed up foreign exchange limits somewhat on
The People's Bank of China doubled the renminbi's trading
band to 2% on the weekend – an amount it has actually moved over the last two
months against the dollar.
European shares opened with small gains.
Risk premium factor
On agricultural commodity markets, there has been some
expectation that the Crimea vote would at least keep wheat prices elevated today, with Ukraine being a major exporter of
the grain, and of corn too.
As Vanessa Tan at Phillip Futures said, the Crimea vote "could
result in further sanctions imposed on Russia".
"This would translate to higher risk premium for wheat
prices as it could further disrupt wheat shipments from the Black Sea region,
putting wheat shipments from a major exporting region of wheat at risk," and
switching demand to the likes of Europe and Russia.
At Commonwealth Bank of Australia, Luke Mathews said: "Although
a vote by Crimeans to join Russia was expected, the risk of further escalation
in tensions means wheat market will likely retain a substantial risk premia."
'Possibility of $3-4-a-bushel
But even retaining its risk premium was tricky for wheat, with Chicago's May lot down 0.3%
at $6.85 ¼ a bushel as of 09:50 UK time (04:50 Chicago time).
And corn, of which Ukraine is actually a more important exporter,
dropped 1.2% to $4.81 ¼ a bushel.
"No immediate political reaction from Ukraine could mean
lower trade," Benson Quinn Commodities forecast.
Besides the generally calm market mood, investors were
hardly encouraged to extend their long positions in the grains by confirmation over
the extent of ground on this score that has already been taken.
Managed money, a proxy for speculators, turned net long in
Chicago wheat futures and options in the week to last Tuesday for the first
time since December 2012, taking a net long position of 10,500 contracts.
In Chicago corn, managed money extended its net long position
above 200,000 contracts, also for the first time since December 2012.
There is still another 200,000 contracts and more to go
before the corn net long would touch its record high (of 429,189 contracts).
But is this so likely in times when the US has had a record harvest, looks set
for another one and South America's harvest is in train too?
In fact, CHS Hedging clocked "some renewed chatter about the
possibility of $3-4-a-bushel cash corn becoming more of an everyday occurrence
in the near future as the market focuses on supply, not demand".
'Dryness continues to
plague the region'
Then there is the weather to factor in, and the prospect of
continued dryness in the Plains wheat belt.
"Dryness continues to plague the region especially in
central and south western crop areas," weather service MDA said.
"A few rain and snow showers (mostly rain) will favour
Nebraska, eastern Texas, and eastern Oklahoma."
However, precipitation amounts through Friday will be "0.10-0.50
inches with 20% total coverage".
That is offering some support to wheat, whatever the Crimea
"Forecasts for rain for the hard red winter wheat areas of
the US remain void of anything meaningful again. Rain will be needed as this
wheat begins to break dormancy," CHS Hedging said.
For corn, the weather situation is a little different, with
dryness not such an issue in its Midwest growing heartland, but cold indeed a
factor in terms of soil temperature, with seedlings requiring 54 degrees
Fahrenheit (figures vary) to germinate.
In fact, "the forecast has trended colder in the western
Midwest" too, MDA said,
Still, there appear to be signs of sowings progress in the
south east, an early planting region of the US.
Nor could soybeans
manage much headway, easing 0.5% to $13.81 a bushel for May.
In fact, this week is set to bring rain to some parts of
southern Brazil where dryness has been an issue, although is it now too late?
MDA flagged that the rain "will produce harvest delays in Rio Grande do Sul and
That said, next week "drier weather in Parana and Rio Grande
do Sul will improve harvest progress", the weather service added.
But if the South America weather signals were mixed, the talk
of China, the top soybean importer, remained firmly negative.
'Prices are heavy'
CHS highlighted that "continued chatter about Chinese soybean
cargo cancellations seem to hold more water now".
At Phillip Futures, Vanessa Tan said: "We can expect China's
demand for soybeans to lower on the current bird flu outbreak which would curb
demand for soybeans as feed."
"Weekly export sales of US old-crop soybeans fell below
expectations last week, further emphasising weakening export demand for US
soybeans," she added.
CBA's Luke Mathews said that "soybean prices are heavy in
response to concerns about Chinese soybean demand and Chinese defaults on US
and Brazilian soybean cargoes".
Futures on China's Dalian exchange hardly helped by falling
0.4% to 4,351 remninbi a tonne for the best-traded September soybean contract.
September tumbled 1.0% to 3,209 remninbi a tonne.
Nor, elsewhere in the oilseeds complex , was Kuala Lumpur palm oil in top form, after Intertek and Societe Generale de
Surveillance estimated Malaysian palm exports falling 21% in the first half of
March, compared with the first half of February.
Kuala Lumpur palm oil for June dropped 1.1% to 2,742 ringgit
Coffee belt weather
Gains were hardly the status quo in soft commodities either,
with some rains at the weekend reaching Minas Gerais – Brazil's top coffee-growing state, where drought is
a big issue – as well as Sao Paulo, the main cane-growing state.
That said, "all of central and Eastern Brazil - Goias, Minas Gerais Bahia - will stay completely dry over the
next five day," WxRisk.com said, adding that "temperature will continue to run
above and much above normal in these areas".
And while rainfall does look on the cards for the weekend
onwards, marching up from southern Brazil, "the rains will have lost a lot of
their intensity" by the time they reach Minas "and the coverage which will be
closer to 1-2 inches", the weather service said.
Arabica coffee for May fell 1.6% to 195.25 cents a pound in
And raw sugar
dropped 0.6% to 17.14 cents a pound, in what could be a seasonal decline?
"Prices now appear set to follow their typical seasonal sell
off in March, April and May," CBA;s Luke Mathews said, noting that prices have
fallen in March "for each of the past seven years, with an average losing
margin of 13%.
"Values have also declined in five of the past seven Aprils,
and five of the past seven Mays."
Brazil cane industry group Unica will later release cane
processing data for the second half of February, which could be more
interesting than usual (given that it is low season) given talk of mills
starting crushing again before the usual April ramp up.