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Clouds over Ukraine supplies revive wheat prices

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Wheat futures bounced 3% amid fresh concerns over the impact of Ukraine's crisis on its supplies of the grain, with the country confirming crop losses and - unconfirmed - market talk of potential export curbs.

Wheat futures for September recovered from early losses to stand 2.5% higher at $5.56 a bushel in morning deals in Chicago.

The bounce was attributed initially to report on the Interfax news agency that Arseny Yatseniuk, the Ukraine prime minister, had forecast a loss of 15% in the Ukraine harvest, which would be equivalent to more than 9m tonnes.

The prime minister's office later clarified that the 15% losses referred only to the harvests in the Donetsk and Luhansk regions, where tensions with pro-separatist rebels are worst.

Neither region is actually a major wheat grower, and Luhansk one of the smaller grain-growing areas overall, although Donetsk is a major producer of corn and spring barley, as well sunflower seed, according to INTL FCStone.

A figure of 15% losses would likely equate to less than 600,000 tonnes of grain.

While nearly 3m tonnes of grains have already been harvested in Donetsk and Luhansk, "a certain percentage of fields in these regions continue to be dangerous for harvesting", the Ukrane farm ministry said.

'Hard to believe'

Nonetheless, Chicago wheat futures at midday local time (18:00 UK time) remained well in positive territory, at $5.49 ½ a bushel, a gain of 1.3%, amid talk that Ukraine is poised to implement some form of export curbs.

However, the rumours - which are unconfirmed - were viewed with great scepticism by commentators including Terry Reilly, senior commodity analyst, grain and oilseeds at Chicago-based Futures International.

While Ukraine does have a history of curtailing grain shipments, "I find it hard to believe that when people have been talking of a record 63m-tonne harvest they will see the need to limit exports," Mr Reilly told, terming the rise in prices a selling opportunity.

"We do not see why they could do this, especially when producers need to collect whatever cash they can" to pay for autumn sowings, with credit hard to come by, and expensive, in Ukraine.

A European trader reported periodic rumours of Ukraine clampdowns on exports, but said that "none have come true. I would be sceptical about this one too".

Businesses affected

However, Mr Reilly said that he was increasingly concerned over Ukraine harvest prospects for 2015, given the continued unrest in Ukraine, and the knock-on effects on credit availability and, through a tumbling hryvnia, on the affordability of imported farm inputs.

Separately, egg producer Avangardco on Tuesday raised the potential for a legal challenge to a move by Crimea's Russian-backed government to compulsorily purchase a poultry farm in the peninsula.

Avangardco has also seen an eastern Ukrainian feed mill overtaken by rebels, and has cut back operations at egg production plants in the area.

Other groups affected include Cargill, which said on Tuesday that it had received reports of a fire at a Donetsk sunflower-seed crushing plant, reportedly after a missile attack, while poultry-to-grains group MHP reported this month it has suspended operations at a hatching egg farm in Donetsk.


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