Grains Respond To Rising Black Sea Tensions

March 3, 2014 12:02 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are trading mostly 8 to 13 cents higher, soybeans are 5 to 13 cents higher in old-crop contracts and 1 to 3 cents higher in new-crop contracts, while wheat futures are 15 to 24 cents higher. Cattle futures are mixed and hogs are slightly firmer in light electronic trade this morning.


* Black Sea tensions rise. Russian troops moved into the Crimean peninsula, which is part of Ukraine, over the weekend and Russia also launched warships to the Crimean port at Sevastopol. Ukraine mobilized troops to the region in response, causing tensions to escalate. Corn and wheat futures are being sharply supported this morning as military activity in the region threatens to slow grain movement from the Black Sea, which is a key global grain hub. Escalating tensions in the Black Sea region could ramp up demand for U.S. grains as global end-users look for reliable supplies.

The long and short of it: Keep an eye on this situation. Because the Black Sea region is such a key global grain hub, it has potential to be very explosive if tensions continue to escalate and linger.

* Ministry modestly revises up China February soy imports. China's Ministry of Commerce now pegs the country's February soybean imports at 5.05 MT, up modestly from its prior forecast of 5 MMT. Official customs data for February soybean imports will be released soon. The ministry forecasts March soybean imports will drop to 3.49 MMT. Reports out of China late last week signaled one northern port had stopped unloading soybeans due to a lack of storage space. Bird flu has reduced demand for soybean meal and caused Chinese crush margins to fall.

The long and short of it: Logistical issues and late-season crop concerns in Brazil are supportive for soybean futures as traders expect China to continue taking shipment of old-crop U.S. soybeans. But if other Chinese ports become backlogged, it could slow Chinese demand and turn price-negative.

* China's manufacturing sector continues to slow. China's manufacturing sector slowed last month amid declines in domestic and export demand. The official purchasing managers index (PMI) dipped to an 8-month low of 50.2 from 50.5 in February. Meanwhile, private firm HSBC's final PMI for February dropped to 48.5 from a final reading of 49.5 in January.

The long and short of it: Typically, weakening economic data out of China would be price-negative for grain/soy futures and commodities in general. But given rising tensions between Ukraine and Russia are a far greater and immediate focus for grain traders.


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