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Malaysian Airliner Crash in Ukraine Sends Wheat Market Skyward

Jeff Caldwell Updated: 07/21/2014 @ 10:08am Agricultural content creator and marketer.

Wheat futures took off Thursday afternoon to close double-digits higher after news that officials suspect rebels shot down a Malaysian airliner over Ukrainian airspace, killing 295 people.

The movement of that region's wheat to the Black Sea and onto the export market could be threatened or embargoed altogether, both potentially bullish factors for the trade, hence the wheat pit's sharp reversal during Thursday's open-outcry trading session. The September wheat futures contract ended the day 12 3/4 cents higher at $5.50 3/4 per bushel, according to Barchart.com. Corn futures wound up slightly higher than where they spent most of the day; the nearby contract closed 1/2 cent higher at $3.87 1/4 per bushel, protected from further losses by bullish export sales data. Thursday's USDA Foreign Agricultural Service (FAS) weekly export sales report shows 573,700 metric tons of corn was exported last week, 58% more than the previous week and "up noticeably" from the rolling four-week average. Soybeans led higher prices earlier in Thursday's session only to reverse in afternoon trading to close 8 cents lower for the nearby contract at $10.94 per bushel.

The day's flip-flopping prices in all three pits were spawned by the Malaysian airliner's crash and subsequent news that it was shot down by rebels in an "act of terror" along the embattled Russia-Ukraine border, officials say.

"Reports that a Malaysian airline passenger plane was shot down by Ukraine rebels provided extreme volatility during the morning session," says Alan Brugler, Brugler Marketing & Management, LLC. "The bull angle would be if Russian exports are embargoed in response."

The Russia/Ukraine region -- some of which is considered the breadbasket of Europe for its concentration of wheat production -- has been amidst turmoil for months. Thursday's actions, though, could trigger action, about which there's been much speculation in the wheat marketplace, says Sal Gilbertie of Teucrium Trading.

"The initial reports I’m reading are stating concerns over the potential reactionary implementation of very tight sanctions on either Russia or Ukraine (or both) in response to the jet’s downing -- which could conceivably affect wheat exports from the Black Sea, which is a major global source of origin for wheat," Gilbertie says. "I think it is a very fluid situation and far too early to predict sanctions, but any disruption in Black Sea wheat would immediately take away a very competitive source of global wheat supplies, which means buyers would likely turn back to the U.S., the EU, and Australia for their ongoing wheat purchases. Perfect supply conditions had been priced into the grain markets up until today’s news, so any excuse for shorts to cover and buyers to secure some supply at current prices will likely cause significant impact to prices, at least in the short-term."

Looking a little further ahead, analyst Al Kluis says he doubts the Malaysian airliner's crash and subsequent action in the Ukraine/Russia region won't have too long-term of effects unless there's serious action taken that totally disrupts the normal global wheat market's makeup. Otherwise, even the smallest rally right now -- a time when the trade's largely in a bearish frame of mind -- should be fed with sales.

"The commodity funds are huge shorts. So when they go to the sidelines, they buy. Very little for sale above the market, so prices explode higher inter-day," adds Kluis, market analyst and broker with Kluis Commodities LLC. "Great selling opportunity; doubt if it has legs. Also, the forecasts for 90s next week had some buying corn and soy again. The rally should be sold."

More on the Malaysian Airlines crash & market reactions

Malaysia Airlines MH17: Ukraine Plane Crash Ignites Twitter

Published: 7/17/2014

The crash of Malaysia Airline flight MH17 in Ukraine on Thursday shocked the world and set Twitter abuzz. Thousands took to the social media site to share their condolences after reports that pro-Russian rebels in Ukraine shot down the plane, which was flying from Amsterdam to Kuala Lumpur. That report has not been confirmed.

Local Ukraine Residents Says They Saw Rebels With Missiles Suspected Of Taking Down Malaysia Plane

Published: 7/17/2014

Earlier today a Boeing 777 Malaysia Airlines passenger plane from Amsterdam to Kuala Lumpur crashed in eastern Ukraine around 10:00 EDT. According to the second witness, the Buk missile system spotted in Torez, Ukraine, "was being towed and it was transported to the Snezhnoye." Snezhnoye is a rural locality in the Donest'ka Oblast'.

Gold Rallies As Malaysia Airlines Crash Reignites Russia-Ukraine Worries

Published: 7/17/2014

It has all the elements of a melodramatic potboiler: An airline thrust into the world spotlight after one of its jets mysteriously vanished in empty stretches of the Pacific Ocean loses another plane, this time around the Russia-Ukraine border, an area already a hotbed of fighting and geopolitical strife.

I shouldn't, but I will call the bottom on wheat

Published: 7/15/2014

This is not a real brave call but at some point the absurdity ends. It is possible prices could fall a bit more and bounce around but I think the damage has been done. Farmers up against it in Ukraine may have to sell. Indian farmers will sell because their price is protected at a very high level and they're insulated from the market.

Malaysian jet with 295 on board crashes in Ukraine (AFP)

Published: 7/17/2014

GRABOVE (Ukraine) (AFP) - A Malaysian airliner carrying 295 people from Amsterdam to Kuala Lumpur crashed on Thursday in rebel-held east Ukraine, as Kiev said the jet was shot down in a "terrorist" attack. Ukraine's government and pro-Russian insurgents traded blame for the disaster, with ...

OptionEye - Macro Outlook - July 17th

Published: 7/17/2014

Good morning. Well, that was short lived. Corn down 1, beans up 2 and wheat is sharply unchanged. The 10 year slipping again this morning down to 2.51% but not really going anywhere. Stocks are lower, giving back yesterday's gains. We see housing starts and building permits today as well as more earnings. Financials not off to a good start while the commodity sector is flatlining.

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mark guildenzoph 07/17/2014 @ 4:23pm Yeah that sucks but come on its one plane and your using that as an exscuse to shift the market? There have been that many deaths in Chicago in the last couple weeks must not mean much for the market though just locals.

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