Grain markets recall past, brace for volatility amid Ukraine crisis
By Karl Plume
CHICAGO, March 4 (Reuters) - The crisis in Ukraine is roiling grains markets, but with wheat already harvested and shipped and global stockpiles of corn that can substitute for Ukrainian maize, it appears unlikely, at least for now, that there will be major global supply shocks.
Some traders are even seeking lessons from the 1986 disaster that hit the nuclear plant at Chernobyl in northern Ukraine. When the plant exploded and sent radioactive particles across the western Soviet Union, fears of widespread radiation contamination disrupted grain shipments from the region, and caused significant price volatility, before markets returned to normal.
"The Black Sea region can easily expand or contract at the drop of a dime when it comes to production and exportable supply," said Terry Reilly, senior commodities analyst with Futures International.
The Ukrainian wheat crop of 2013/2014 already is past the stage of being affected by the Crimean crisis. It is already harvested and the export portion shipped. The world's sixth-largest wheat exporter, Ukraine ships much of its wheat to Egypt and other import-dependent countries around the Middle East and North Africa.
In the two weeks after the Chernobyl disaster, U.S. wheat prices rallied nearly 20 percent, then retreated to previous levels over the next three weeks. Today, wheat futures have jumped almost 10 percent in just the past three trading sessions.
Ukraine, the world's fourth-largest corn exporter, is less of a factor than in 2011 and 2012, when a significant drought in United States, the world's largest corn producer, disrupted supplies. Importers like Egypt and South Korea had turned to Ukraine during the drought years, but were lured back by the record 2013 U.S. harvest.
Record stocks in the United States mean U.S. producers have plenty of corn to ship to meet demand should Ukraine shipments be cut off, traders and analysts said.
"If there is any major disruption in corn exports the market will be comfortable to quickly adapt and turn to U.S. supplies or even South America. There is a lot of wheat that could potentially come on line as well, especially from Canada, India, maybe Australia, and of course the U.S.," Reilly said. Continued...