Wheat Prices Jump Most in Three Months as Ukraine Turmoil Mounts

Jul 17, 2014 4:09 pm ET

July 17 (Bloomberg) -- Wheat futures jumped the most in three months after Ukraine said rebels shot down a Malaysian jet carrying 295 people near its border with Russia, spurring concerns that Eastern European grain shipments face disruption.

Escalating violence between the countries may hinder transportation to export terminals in the Black Sea region, Helen Pound, a senior commodity specialist at KCG Futures in Minneapolis, said in a telephone interview. Russia is the world’s fifth-biggest shipper, and Ukraine is ninth, International Grains Council and Eurostat data show.

Wheat surged 15 percent in the first quarter as tensions in Eastern Europe increased supply concerns. The grain then tumbled 17 percent in the three months ended June 30 amid signs of easing turmoil and receding drought conditions in the U.S., the top exporter.

“It has seemed as though the two sides were trying to scale back the intensity of fighting,” Pound said. “This is way different from what people had been expecting.” In Ukraine, farmers “have an excellent crop, so if it’s able to make its way into world markets, that’s pretty bearish. If it’s not, that’s a different situation.”

Wheat futures for September delivery jumped 2.4 percent to settle at $5.5075 a bushel on the Chicago Board of Trade, the biggest gain for a most-active contract since April 15. Trading was 42 percent above the 100-day average, according to data compiled by Bloomberg.

World Inventories

On July 14, wheat touched $5.2425, the lowest in four years. World inventories by the end of May will reach 189.54 million metric tons, the U.S. Department of Agriculture said on July 11. That’s 2.8 percent more than a year earlier. Ukraine’s grain exports are exceeding last year’s shipments, government data showed on June 27.

Corn futures for December delivery rose 0.1 percent to $3.8725 a bushel in Chicago. The price jumped as much as 2.3 percent on news of the jet crash. The grain has dropped 8.2 percent this year on forecasts for a bumper U.S. crop.

Soybean futures for November delivery dropped 0.7 percent to $10.94 a bushel. Earlier, the price climbed as much as 1.5 percent.

This week, U.S. exporters have reported a combined 1.19 million tons in spot sales, including 948,000 tons to China, the biggest consumer.