soared 3% as concerns over Ukraine flared up again, after Nato claimed that "well
over 1,000" Russian troops have crossed the border, reviving concerns over the region's
important grain exports.
Wheat for December hit $5.79 ¼ a bushel in Chicago, the
highest since a spike on Ukraine concerns three weeks ago, before easing back
to close at $5.71 ¾ a bushel, a gain of 1.7% on the day.
In Paris, November wheat touched a three-week high of E177.25
a tonne before retreating to close at E175.00 a tonne, up 0.9%.
The gains followed Nato's warning of a "severe escalation"
in Russian military action against Ukraine, with the organisation claiming that
satellite pictures present "additional evidence Russian combat soldiers
equipped with heavy weapons are operating inside Ukraine".
Besides the alleged 1,000 Russian troops within Ukraine – a claim
that Moscow denies – Nato said that a further 20,000 were massed at the border.
Petro Poroshenko, the Ukraine president, said in a televised
statement that he had cancelled a planned trip to Turkey after "Russian troops
entered Ukraine", also calling for emergency meetings of the UN Security Council
and the EU Council of Ministers to "discuss the "deteriorating situation".
Close to port
Wheat prices have acted somewhat as a barometer for
Russia-Ukraine tensions, given the region's status as a large source of
competitively priced supplies, with support, like tensions, typically proving
"Wheat rallies spurred by bad Russia behaviour have
repeatedly sputtered," said Richard Feltes at Chicago broker RJ O'Brien.
However, this time, the market had extra support from the increasing
action in south eastern Ukraine, near to Mariupol, one of the country's main
ports of handling grain exports.
factors turned helpful, with Chicago's December contract on course for what
would be only its second close above its 50-day, and 40-day, moving averages in
more than three months.
'Better technical support'
"Wheat markets are also showing better technical support," Minneapolis-based
Benson Quinn Commodities said.
"While wheat has come well off its highs, trade above the
50-day moving average in Chicago has triggered a round of short covering in
that market," with many investors putting great store in chart signals.
"The key to further upward momentum would be forcing
additional short-covering by the fund community in Chicago futures," Benson
Hedge funds held a net short of 50,000 in Chicago wheat
futures and options as of Tuesday last week, the latest data available.
Stronger export data
Furthermore, wheat futures continued to gain some support
from concerns over the impact of persistent rains on the US spring wheat crop,
with worries over the threat to quality, as well as in slowing harvest
"Concerns about the pace of harvest progress and potential
quality issues in the North American will remain a front burner issue," Benson
Quinn Commodities said.
Meanwhile, there are renewed fears over dryness in
Australia, with an Australian Bureau of Meteorology forecast of dry weather in
the east of the country for the rest of 2014 sparking concerns of losses of up
to 2.5m tonnes in central New South Wales alone.
And weekly US wheat export sales data were stronger, at
403,600 tonnes, nearly double those of the week before and in line with market
These included a particular recovery in hard red winter
wheat sales to 205,000 tonnes, from net cancellations of 25,000 tonnes the week
Kansas City hard red winter futures for December added 1.1%
to $6.44 ¾ a bushel, closing over its 40-day moving average for the first time
in three months.
Some of the strength in wheat carried through into fellow
grain corn, although the spread
between the two grains widened above $2.10 a bushel at one point, up $0.13 on
US weekly corn export sales were decent, at 696,000 tonnes
for 2014-15, at the top end of market expectations.
However, repeated reports of strong yields from the early US
harvest, in the South, and a lack of a weather threat to Midwest remained a weight
Forecasts continue to show little chance of an early frost
heading into early September.
December corn ended 1.2% higher at $3.69 ¼ a bushel.
too, with talk of sudden death syndrome in the US Midwest crop, and strong
export sales, offsetting some of the weight from strong yield reports from the
"Early soybean yields from the Delta have been impressive
with some as high as 75-90 bushels per acre," said CHS Hedging.
"With harvest getting underway in Louisiana, there have been
reports of 50-80 bushels per acre versus last year's state average of 48 bushels
Export sales, however, came in at 1.29m tonnes for 2014-15,
more than twice expectations of many traders, and including 655,000 tonnes to China,
the top importer.
That further eased jitters over sale to China, after a
report earlier in the day from Shandong Changhua Food Group over an easing in a
commodity financing squeeze.
"Some banks that had stopped lending to us have started
to gradually resume co-operation with Changhua, allowing our commodities
trading operations to return to normal," the company, a major palm oil and
soybean importer, said.
Furthermore, the prospect of a long US weekend, and an extra
day without being able to trade, encouraged position closing in a crop in which
hedge funds have an, unusual, net short position.
November soybeans closed 0.5% higher at $10.28 ¾ a bushel.
Among soft commodities, raw
sugar managed small gains, adding 0.2% to 15.61 cents a pound for October
delivery, helped by support from Commerzbank and Job Economia, which said it
was "time to buy" the sweetener.
And arabica coffee
for December stood up 1.0% at 200.20 cents a pound, looking for its first close
in three months above 200 cents.
The rise was helped by a drop in coffee stocks, to 2.41m
bags, held for delivery against New York futures, besides by continued talk of crop
damage in Brazil to drought, which will affect the 2015 harvest as well as
already curtailing 2014 output.
"Traders keep buying the market due to the loss reports from
Brazil and drought reports from Central America," Jack Scoville at Price
He also noted "more talk that some recent rains in Brazil created
premature flowering and that these flowers could be aborted", undermining 2015
In Indonesia too, a major producer of robusta beans, "there was talk that early rains in had created some
flowering that could hurt production if it turns hot and dry again," with
flowering a month earlier than normal.
Still, robusta for November delivery dropped 0.4% to $2,039
a tonne in London.