Wheat prices jumped 3%, leading futures of other grains
higher in what one broker termed a "three legged stool" of bullish events – the
main one being the building tensions in Ukraine, and concerns of a fresh
Rather than bowing to an early-Monday deadline to quit a building
in east Ukraine that they have been occupying, pro-Russian protestors upped
their demonstration against Kiev rule by occupying another government building.
With Moscow warning Kiev against reprisals against the
pro-Russian protestors, and US and Russian delegates involved in a lively
debate at the United Nations on Sunday, fears grew over rising tensions in a
region which is a major producer and exporter of grains.
Besides the potential direct threat to grain export
logistics from the unrest, markets are factoring in the knock-on effects too
from the impact of deteriorating credit conditions and a weak currency on prospects
for the Ukraine harvest this year.
"The new tension in eastern Ukraine has prompted a
significant amount of buying," Darrell Holaday at broker Country Futures said.
While the country is actually a bigger exporter of corn than
wheat, "the wheat market has always been the buyer's choice when new
developments occur in Ukraine".
CHS Hedging said that "tensions in Ukraine once again,
brings into question their ability to export wheat, adding that Ukraine farmers
also struggle with uncertainty about input financing".
Indeed, Richard Feltes at Chicago broker RJ O'Brien said
that "2014 Ukraine grain production prospects are a subject of debate with some
observers concerned that farmers will encounter reduced access to credit and inputs".
In fact, not all the news from the region was so downbeat.
Goldman Sachs played down the risk of sanctions against
Russian grain exports, noting that the country is a big supplier to poorer
On cue, Russian supplies proved the cheapest at an Iraq
tender, offered at $331.69 a tonne on a c&f free out (ciffo) basis, below
Canadian supplies offered at $340.50 a tonne and Ukrainian at $342.73 a tonne.
And the European Union cut import restrictions on Ukrainian
goods coming into the bloc, a move expected to buy-ins of the likes of grains.
It was perhaps little surprise that Paris wheat took a bit
of time to get going, before ending up 2.0% at E214.00 a tonne for May delivery.
Still, wheat markets did have two other supports to rely on.
Mr Holaday said: ""The wheat market is standing on a three-legged
stool today that is supporting the double-digit gains," in cents-per-bushel
The first was the disappointing rain in the southern US Plains,
which proved even smaller over the weekend than the minimal levels forecast,
with moisture badly needed to refresh drought-hit crops.
Furthermore, more cold weather is expected too.
"Hard red winter wheat producers were disappointed with
precipitation over the weekend and a hard freeze tonight adds to concerns," CHS
"There was a weekend precipitation event in eastern Kansas,"
the top US wheat-growing state, "but the western half of Kansas appears to have
only received light rain and snow."
Mr Holaday added that "the third leg is the fact that the
wheat market was very oversold on the close Friday.
"So the interest in selling wheat today is very low,"
meaning the Ukraine crisis and US dryness "have had a larger impact" than might
have been expected.
Actually, there was something of a fourth leg too in terms
of US data on wheat exports for last week which, at 683,544 tonnes, beat
expectations and the 626,404 tonnes the week before, easing some of the
concerns over demand fostered by a lack of US success in high profile tenders
In fact, Taiwan purchased 92,550 tonnes of US wheat over the
Chicago wheat for May closed 2.8% higher at $6.78 ¾ a bushel
in late deals, while its Kansas City-listed hard red winter wheat peer was up
3.1% at $7.41 ½ a bushel.
Minneapolis spring wheat for May gained 2.2% to $7.17 ¼ a
With wheat flying, it was hard for corn to perform too badly, although there were some nerves ahead of
key data expected at 15:00 Chicago time (21:00 UK time) when the US releases
its first planting progress data for the grain of 2014.
Sowings are expected to have been slow, thanks to cold
weather and soil temperatures in the Midwest, and too much rain in eastern
But how slow?
"Trade is expecting 2-5% of corn planted nationally," Allendale
said, a wide enough spread it has to be said, equivalent to more than 2.5m
Meanwhile, sowings progress this week may be slow too.
"Heavy rain events across Iowa, Wisconsin and Arkansas will
slow fieldwork this week as we approach the insurable date for the 2014 corn
crop," CHS Hedging said, adding that "temperatures appear unseasonably cool,
also slowing spring planting".
That said, Mr Holaday noted that the midday run of the GPS
weather model "is a little more friendly for corn planting next week with reduced
moisture in the Midwest and warmer temperatures".
That reduced the popularity of the grain, which had also
received some support from strong US exports, at 1.45m tonnes last week, as
measured by cargo inspections.
Chicago's corn contract closed up 0.9% at $5.03 a bushel, lagging
wheat but retaking its 10-day moving average.
'Very concerned about
The grain in fact matched soybeans, which ended up 0.9% at $14.76 ¼ a bushel in Chicago for
Sure, many concerns remain about Chinese defaults.
In fact, Shanghai-based research group JC Intelligence forecast
that China could could default on 2m tonnes of soybeans, adding that the
country's imports in July, July and August could total 16.5m tonnes – down some
4m tonnes year on year.
"The soybean market is very concerned about the Chinese
default on several loads of soybeans," Paul Georgy Allendale said.
Data on Tuesday
But that is not all the market has to think about, with the
NOPA industry group to reveal March US soybean crush data on Tuesday.
Ideas for the figure have risen, with the likes of Jefferies
Bache flagging "the extremely large soymeal exports seen over the past few
Analysts expect a crush figure of 146.1m bushels, and 1.92bn
bounds for soyoil stocks. A year ago the crush figure was 137m bushels.
Weekly US exports were not so hot at 267,939 tonnes – sure,
well down on the 510,000 tonnes the previous week but leaving the country still
on track to hit the figure of 43.0m tonnes expected for the full season.
Among soft commodities, cotton
for July gained 0.2% to 92.28 cents a pound in New York, helped by concerns
over the dryness in the southern US extending to output of the fibre too, with
Texas being the top producing state.
And arabica coffee for July added 1.9% to 207.40
cents a pound, with Somar saying that rains hitting Brazil's coffee belt, while
capable of halting damage from the area's drought, were too late to promote any
recovery in a crop which is already being harvested in some areas.
Goldman Sachs lifted its forecast for arabica coffee futures,
albeit to levels below the futures curve, but acknowledged "upside risk" to its
was soft falling 0.3% to £1,878 a tonne in London for July, and by 0.1% to
$2,996 a tonne in New York, amid talk of rains boosting hopes for the mid-crop
in Ivory Coast, the world's top producing country.
The market is expecting some more grind data later this week,
on North American volumes, expected to show only small growth year on year.
"We'd rather focus on the Asian and West African numbers
which represent a greater tonnage," Marex Spectron said, adding that "the
sentiment is that these numbers should add up to +2.5-3% year-on-year when
Processing has been switching from consumption areas, such
as Europe, to producing regions – but by how much?
And raw sugar for
May eased 1.3% to 16.59 cents a pound in New York, with Brazil rains expected
to foster some recovery in cane, and with doubts too over the hedge funds' willingness to increase further their net long position.