Wheat and corn surge

US 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 December 19 and notching the largest daily gain since July 2012.
CBOT May corn jumped 7 cents to $4.70-1/2, highest since September 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, US regulatory data showed last week. The US 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. CBOT May soybeans reversed earlier gains to ease 4-3/4 cents to $14.09-1/4 per bushel.