Corn, wheat, soybean markets react to tension in Ukraine

Grain & Oilseeds Report

Corn: Corn continued to rally Monday, supported by the ongoing conflict in the Ukraine. The May contract settled at 470-1/2, up 7 cents. Russia continued to flex its muscles, threatening to seize Ukraine’s warships in Crimea. They later claimed to make no such threat. It seems evident that this is more a media driven political event that, when all is said and done, will not result in a major military conflict.

Ukraine has shipped 14.2 million tonnes of corn out of USDA’s estimated 18.5 million total exports through the end of February. Any talk of port delays due to this conflict seems unfounded at this point. We will continue monitor events as they unfold.

It should be noted that we have hit our target price for the upside in corn and have now turned to a neutral to bearish bias. At this point, making sales or getting more price protection in place is not to be discouraged…Scott Donarski

Soybeans: The bean markets had another volatile day to begin the week’s trading. Three of the last four Sunday/Monday nights have been launching pads to the upside and after Sunday night, you could say four out of five of the last Sunday/Monday have been launching pads for the bulls.

With the events in the Ukraine taking a turn for the worse over the weekend, shorts in the market ran for cover when the market opened Sunday night. Later in the day session, the bean rally faded and eventually went negative on the day. Trade action suggests that funds were liquidating their soybean and meal position and buying corn and wheat.

With the Ukraine being the number three world corn exporter and the number six wheat exporter, it seems someone wanted to book bean and meal profits and put money on wheat and corn to go higher. For the day, funds bought an estimated 20,000 contracts of corn, 18,000 contracts of wheat and sold 5,000 contacts of beans…Jim McCormick

Wheat: Wheat finished the day higher but well off the highs we saw earlier in the trading session. We mentioned the Ukraine unrest as a reason to see some shorts cover their wheat positions, but with the recent escalation of the situation in Crimea we would have to suspect additional short covering may be seen.

The Ukrainian government only has about 2.7 million tonnes of additional wheat to export as part of this year’s export program. There may be a concern about wheat acres in the ground but right now it doesn’t appear that Russia is going to advance much beyond their current hold of the Crimea Peninsula.

The major rejection from the highs we saw today on big volume could actually spell trouble for the markets as we are also looking at a gap on the chart below this most recent move. The Ukrainian government has also announced they are going to continue moving wheat even with this recent confrontation with Russia. With a new government in place and with little available money in the country, the best way to generate some capital is with exports so this may actually promote additional sales. It doesn’t appear this situation is going to slow down the Russian export of wheat through the Black Sea either…Cordon Sroka

About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com

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