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
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 ¾ a
bushel before easing to $5.48 ¾ 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
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
"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.
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
"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.