March 3, 2014 / 12:07 PM / 6 years ago

GRAINS-Wheat, corn surge as market frets over Ukraine

* Black Sea exports seen at risk from Ukraine, Russia
standoff
    * Wheat hits more than 2-month high, corn at 5-month peak
    * No impact on shipments for now, funds seen fuelling rise

 (Updates U.S. market activity to close; adds analyst comments,
fund totals)
    By Michael Hirtzer
    CHICAGO, March 3 (Reuters) - U.S. wheat futures surged
nearly 5 percent On Monday, the most in 1-1/2 years, as tensions
in Ukraine stoked fears of disruption to shipments from the
Black Sea, one of the world's key grain-exporting zones.
    Corn futures jumped 1.5 percent at the Chicago Board of
Trade after Ukraine, a major exporter of wheat and corn, called
up army reserves on Sunday and Washington threatened to isolate
Russia economically after President Vladimir Putin declared he
had the right to invade his neighbor. 
    The political jitters sparked buying by speculative
investors despite assurances by Ukraine's new agriculture
minister that the political turmoil will not reduce spring
sowings. 
    Most-active CBOT May wheat finished 29-1/4 cents
higher at $6.31-1/2 per bushel, earlier hitting the contract's
highest price since Dec. 19 and notching the largest daily gain
since July 2012.
    CBOT May corn jumped 7 cents to $4.70-1/2, highest
since Sept. 30.
    Investment funds bought 18,000 wheat contracts and 20,000
corn contracts, trade sources said. 
    That is the biggest purchase of wheat contracts by funds
since at least 2011, according to Reuters data.    
    "The market is not reacting to new fundamental factors, but
is being driven by investment funds that are short and that are
reacting to a geopolitical context of uncertainty," said Michel
Portier, head of grains consultancy Agritel.    
    Speculative investors, including hedge funds, maintained
their net short stake in CBOT wheat futures while the investors
switched to a net long position in corn futures, U.S. regulatory
data showed last week. 
    The U.S. Department of Agriculture forecasts that Russia and
Ukraine will export a total 26.5 million tonnes of wheat in the
2013/14 marketing season, or 17 percent of global shipments. In
corn, Ukraine alone is forecast to export 18.5 million tonnes,
or 16 percent of total exports.  
    But analysts and traders said there were no signs so far of
actual disruption to trade and that the market was reacting
nervously to risks raised by the weekend's tense developments.
    "When you have a major supplier looking a little less
reliable, what it really creates is volatility. (Investors) are
short and everyone wants to get out at once," said Tim Emslie,
research manager at CHS Hedging Inc. in Minneapolis.
    Wheat was further supported by concerns that parts of the
dormant hard red winter wheat crop in the southern U.S. Plains
could have been damaged by freezing temperatures and
less-than-expected snowfall. 
    Larger-than-expected U.S. export inspections for wheat and
corn were also bullish.  
    However, the higher grain prices also triggered sales by
U.S. farmers, who sold portions of their corn and soybean
harvests from last autumn.
    "I think there has been some pretty good movement today,"
said Roy Huckabay, analyst at brokerage the Linn Group in
Chicago.
    Soybeans, which last week rallied to a five-month high, were
also pressured by export inspections that fell below analysts'
expectations, pressuring futures.
    CBOT May soybeans reversed earlier gains to ease 4-3/4
cents to $14.09-1/4 per bushel.
    
 Prices at 2:21 p.m. CST (2021 GMT)      
                              LAST      NET    PCT     YTD
                                        CHG    CHG     CHG
 CBOT corn                  470.50     7.00   1.5%   11.5%
 CBOT soy                  1409.25    -4.75  -0.3%    7.4%
 CBOT meal                  450.50    -7.20  -1.6%    2.9%
 CBOT soyoil                 42.38     0.59   1.4%    9.2%
 CBOT wheat                 631.50    29.25   4.9%    4.3%
 CBOT rice                 1538.50   -25.00  -1.6%   -0.8%
 EU wheat                   208.50     7.25   3.6%   -0.2%
 
 US crude                   104.68     2.09   2.0%    6.4%
 Dow Jones                  16,140     -182  -1.1%   -2.6%
 Gold                      1351.30    25.51   1.9%   12.1%
 Euro/dollar                1.3732   -0.007  -0.5%    0.6%
 Dollar Index              80.0800   0.3890   0.5%    0.1%
 Baltic Freight               1276       18   1.4%  -44.0%
    

 (Additional reporting by Julie Ingwersen in Chicago, Gus
Trompiz and Valerie Parent in Paris, Manolo Serapio Jr in
Singapore and Colin Packham in Sydney; Editing by Jan Paschal
and Diane Craft)
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