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Malaysian Airliner Crash in Ukraine Sends Wheat Market Skyward

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."

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