Grains surge amid supply concerns over Ukraine

Wheat surged as mounting tensions over Ukraine stoked concern about the outlook for grain shipments from Eastern Europe. Futures in Chicago climbed as much as 4.4 per cent, while contracts tied to corn and soybeans also rose in Chicago as the US said intelligence indicates Russia may attack Ukraine before the 2022 Beijing Winter Olympics end on February 20. Moscow has said it has no intention of invading.

Ukraine and Russia together are heavyweights in wheat — supplying more than a quarter of the world’s shipments of the grain. They also play a big role in global corn and sunflower oil. A protracted discord in the region could keep prices of such commodities elevated and add to food costs that are already the highest in a decade.

While a direct conflict might initially see a liquidation in positions to take risk off, the “ultimate issue for wheat would be bullish for prices,” said Rich Nelson, chief strategist at US based Allendale.

In wheat options, implied volatility on March contracts jumped from 32 per cent to 48 per cent on Friday, with overall volume up about 60 per cent. Benchmark futures in Chicago for May delivery climbed the most in more than four months, before pulling back to end the day up 3.2 per cent at $8.04 a bushel.

Bloomberg Agriculture Spot Subindex neared an all-time high earlier this week, as the outlook for soybean and corn crops in South America continues to dim. Prices across grains, oilseed and softs markets have all rallied recently as supply shortfalls abound, a signal that food inflation already hitting consumers worldwide probably will continue.

More bullish signs for soybeans emerged Friday with a new South American forecast. Soil moisture in Brazil’s south is likely to keep falling in the next 10 days amid dry conditions and high temperatures, worsening conditions for still-developing crops, said Celso Oliveira, Climatempo meteorologist.