Sep 19, 2014
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Jet Crash Over Ukraine Might Spur Wheat Price Gains

July 18, 2014

Wheat headed for the biggest weekly climb in four months as investors weighed the outlook for exports from the Black Sea region after the loss of a passenger jet over Ukraine spurred concern supply may be disrupted.

The contract for September delivery rose as much as 0.7 percent to $5.5475 a bushel on the Chicago Board of Trade and was at $5.545 by 1:59 p.m. in Singapore. Prices jumped 2.4 percent yesterday, the biggest increase since April 15. Futures are set to advance 5.4 percent this week, the biggest weekly gain since the period ended March 7.

Ukraine’s government claimed pro-Russia rebels shot down a Malaysian Airlines passenger jet over disputed territory, killing all 298 people on board. While wheat surged 15 percent in the first quarter as tensions in Eastern Europe increased supply concerns, Ukraine’s grain exports are exceeding last year’s shipments, the government said June 27. Russia and Ukraine accounted for 17 percent of world wheat exports in 2013-2014, according to the U.S. Department of Agriculture.

Where Will Grain Prices Find Support?

The "plane crash in the Ukraine renewed the focus on the instability in the region and the potential disruption to wheat exports in the second half of the calendar year," Australia & New Zealand Banking Group Ltd. analysts including Paul Deane wrote in a note today. "Wheat and grain exports from Russia and Ukraine peak around September each year post the winter-wheat harvest. This leaves the wheat price particularly sensitive to events in the Black Sea region in the current quarter."

Wheat fell into a bear market in June and touched $5.2425 on July 14, the lowest since July 2010, on signs of increasing global supply. Global inventories at the end of the 2014-2015 season may total 189.54 million metric tons, up from a previous estimate of 188.6 million tons and the highest in three years, the U.S. Department of Agriculture said July 11.

Corn for December delivery rose 0.3 percent to $3.885 a bushel. Prices are set to advance 1 percent this week, snapping a three-week slump. Soybeans for delivery in November were at $10.9425 a bushel from $10.94, set to rise 1.8 percent this week.

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