Wheat futures hit $7 a bushel in Chicago only to close
sharply lower, as momentum from fund buying ran into caution that fears over
the Ukraine crisis, viewed at the centre of the price rises, may be being
Chicago wheat for March hit $7.00 3/4 a bushel, the highest
for a spot contract since October, before reversing to close down 1.3% at $6.79
Wheat for May, the best-traded contract, hit $6.96 1/2 a
bushel before retreating to end at $6.73 3/4 a bushel, down 1.5% on the day.
Chicago wheat did worse, dropping 1.5% to $6.73 3/4 a bushel
for May, and by 1.3% to $6.79 a bushel for the March contract.
In Paris, the May contract hit E216.00 a tonne, its best for
nigh on a year, before paring gains to close down 1.0% at E213.50 a tonne.
The early gains were widely attributed to concerns over the
threat of Ukraine's crisis to its grain export prospects, besides a dearth of
rain for winter wheat seedlings in the US southern Plains too.
"The political crisis in Ukraine and the dryness
affecting US winter wheat production is providing support," Paul Georgy at
Chicago-based broker Allendale said early in the day.
However, the headway defied a series of cautions that fears
over Ukraine may be overdone for now.
opportunities to sell'
UkrAgroConsult, the Kiev-based analysis group, said that
while 5-10% of Ukraine's grain exports are handled in Crimea – the region
invaded by Russian troops, and at the centre of the country's political turmoil
- the impact on shipments is likely to prove limited for now as most of the
volumes have already been cleared.
At Commonwealth Bank of Australia, Luke Mathews said that
"there is only a small probability that Russian-Ukraine tensions cause a
meaningful disruption to grain trade from the Black Sea region", viewing
prices as offering "attractive opportunities" for domestic producers
to sell at.
"The US Department of Agriculture this week confirmed
global grain supplies are currently comfortable," he added.
At FCStone's Dublin office, Jaime Nolan Miralles warned that
the wheat price may be "divorcing itself from direct wheat/market
fundamentals, and I would caution bulls' temperament under such an environment.
While Ukraine remains a "wild card" for the
market, especially with a controversial poll on Crimean secession due this
week, "if escalation is not the end result there, it is difficult to see
where this short term bull run will find its next feed from".
Rabobank stuck by a "bearish outlook" for wheat
prices in the second half of this year, cautioning that "favourable
conditions for most of the major wheat growing regions through the Black Sea
and European Union" would spur a 20m-tonne rise in world inventories of
the grain – although many commentators have a more conservative estimate.
However, Commerzbank highlighted the potential for worries
over Ukraine exports to drive buyers to other markets.
"Uncertainty over the availability of wheat from
Ukraine points to higher demand for wheat from the EU and the US, something
that is likely to be confirmed by the export figures due to be published
today," the bank said.
In fact, US export sales last week fell 14% week on week to
477,000 tonnes, the US Department of Agriculture said, a figure viewed broadly
A UK grain trader told Agrimoney.com: "The speculative
money still has plenty of scope for putting more cash into the market.
"Wheat has been the one grain in which hedge funds have
had a net short. They are way off any kind of net long position which might
look like they had overegged the pudding."