Wheat Extends Surge as Ukraine Tensions Stoke Supply Concerns

(Bloomberg) -- Wheat extended gains after the biggest weekly advance since November as tensions over Ukraine and Russia ratcheted up, increasing concern that grain exports from the two major shippers could be disrupted. 

Tensions over Russia’s military buildup near Ukraine have entered a potentially decisive week, with the U.S. warning an invasion may be imminent and President Vladimir Putin accusing America of failing to meet his demands. Russia has repeatedly denied it plans to invade its neighbor, and a diplomatic push to try to resolve the situation is continuing.

Wheat futures in Chicago climbed as much as 1.7% following last week’s 5.3% gain. The grain remains about 7% below a peak in November, when prices reached the highest since 2012.

Cargoes flowing from the Black Sea region are key to ensuring the security of world grain supplies. Russia and Ukraine account for nearly a third of wheat and barley exports, and about a fifth of corn trade. Protracted unrest in the region could keep prices of these commodities elevated and add to food costs that are already at the highest in a decade. 

Corn and soybeans also rose in Chicago as traders assessed mounting tensions over Ukraine, while hot, dry weather in South America continued to stoke worries about crops in South America. 

“Ukraine does export some corn but the stronger connection is via the broader grain market,” said Tobin Gorey, a commodities strategist at Commonwealth Bank of Australia. “Tight, and tightening supply across them all makes their prices more sensitive to potential supply interruptions generally.”

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