PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 18:56 UK, 17th Jul 2014, by Agrimoney.com
Wheat prices soar as air crash fuels Ukraine fears
Wheat prices jumped 2% on both sides of the Atlantic, overcoming weakness in other grains, after a the apparent downing of a Malaysian passenger plane in Ukraine revived concerns over tensions in the region, and interruptions to grain exports.

Paris wheat for November, which had being standing little changed before news of the plane crash, soared to close up 2.2% at E183.00 a tonne.

The contract closed back over its 10-day moving average for the first time in July, and touched its 20-day moving average for the first time in two months.

Chicago wheat for September, which had been standing nearly 1% lower before the accident, soared more than 4% at one point to $5.61 a bushel before easing to $5.48 a bushel with half an hour of trading to go, up 2.0% on the day.

The rises, which contrasted with small declines in corn and soybean markets, was attributed to concerns that the Malaysia Airlines plane, which was carrying 295 people, was shot down by an anti-aircraft missile, stoking concerns over a fresh wave of turmoil in Ukraine, and potentially fresh tensions with, and sanctions against, Russia.

'Slow, halt, stop exports'

At Iowa-based broker US Commodities, Don Roose said: "The Black Sea area is a big shipping area for wheat, and the fear is that it could slow, halt, stop exports from the region.

"If it is no longer seen as reliable, buyers will be putting their orders elsewhere."

"People are worried about supplies getting out of port, and that buyers of Black Sea wheat will have to source it from elsewhere," Societe Generale analyst Christopher Narayanan told Agrimoney.com.

While the European Union was, geographically, the most obvious source of replacement supplies, the particularly steep decline in US prices had, earlier this week, rendered it the cheapest of the major origins, including costs of freight, as calculated to the major importing region of North Africa.

"It was only by $1-2 a tonne, and it may all have changed now, but it was the first time in a long time the US was cheaper than the Black Sea," Mr Narayanan said.

'Large short'

Mr Roose added that the rise in wheat futures had also been fuelled by short-covering, with the grain the one main crop in which investors had considerably more short positions which profit when values fall than long holdings.

"Of all the grains, it is wheat in which funds are sitting on a large short," he said.

"That is why wheat is up more than anything else."

As of July 8, managed money, a proxy for speculators, was net short 44,000 contracts in Chicago wheat futures and options, a historically high, if not extreme, negative exposure to prices.

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