US wheat futures surged 3 percent on Thursday, rallying from a four-year low on fears of escalating geopolitical tension in the Black Sea region after a Malaysian airliner crashed in eastern Ukraine, traders said. A Ukrainian interior ministry official said the plane was shot down by pro-Russian militants. Corn futures were mostly higher on the Chicago Board of Trade while soyabeans were mixed.
Ukraine and Russia are both major global wheat suppliers, and news of the plane crash raised fears that an escalation in a four-month conflict between the two countries could inhibit grain shipments from the region. Ukraine is also the No 3 global corn exporter. "It has caught the market's attention," Shawn McCambridge, grains analyst with Jefferies Bache in Chicago, said of the crash. "If it was indeed shot down, it would certainly be an escalation of tensions in the region and would probably open up Russia to some severe consequences as far as additional sanctions or restrictions," McCambridge said.
"If it would be something to block exports, it would be certainly supportive to the wheat market, and also supportive to corn," McCambridge said. At the CBOT as of 11:52 am CDT (1652 GMT), September wheat was up 18 cents at $5.56 per bushel, rallying from a session low of $5.30-3/4 established before news of the crash.
Corn drew support from the news as well, but not as much as wheat. Commodity funds hold a sizable net short position in CBOT wheat, leaving that market vulnerable to short-covering, while holding a net long in corn. Corn drew support from bullish weekly export sales data. The US Department of Agriculture reported sales of US corn in the latest week at 573,700 tonnes for 2013/14 and 494,900 tonnes for 2014/15, above trade expectations.
But gains were limited by expectations for a bumper corn harvest in the United States, the world's biggest producer. The Commodity Weather Group, a meteorological firm followed by grain traders, projected the 2014 US corn yield at 171.0 bushels per acre (bpa), which would surpass the 2009 record high of 164.7.