CANBERRA (Dow Jones) — World grain markets may have reacted prematurely to the crisis caused by Russia's intervention in Ukraine, a senior U.S. agriculture official said Wednesday.
Wheat futures climbed to their highest level since early December while corn hit a fresh five-month high Tuesday on concerns that exports from Ukraine and Russia could be disrupted or affected by possible economic sanctions.
There are no indications of grain purchases shifting from the region due to buyers looking to other more stable suppliers, said Joseph Glauber, the U.S. Department of Agriculture's chief economist.
“I don't have any signs of that at this point,” Mr. Glauber told The Wall Street Journal in an interview Wednesday in Australia, where he has been attending a government commodities conference.
“The short answer is it's too speculative,” he said. “I don't like to second guess markets typically. We'll evaluate this when we do our own forecasts. But right now I think it's way too early to say anything about how much exports will be affected.”
Chicago Board of Trade wheat futures for March delivery gained 13 cents, or 2.1{75f28365482020b1dc6796c337e8ca3e58b9dd590dc88a265b514ff5f3f56c30}, to $6.39 3/4 a bushel on Tuesday, the highest closing price for a front-month contract since Dec. 4, while March corn gained 12 3/4 cents, or 2.8{75f28365482020b1dc6796c337e8ca3e58b9dd590dc88a265b514ff5f3f56c30}, to $4.76 3/4 a bushel.
The USDA, before the crisis erupted, forecast that Ukraine will be the world's fifth-biggest exporter of wheat by volume this year and the third-largest shipper of corn. It sells much of its grain to Egypt, the world's largest importer of wheat, and to other Middle Eastern countries and Africa, with about 10{75f28365482020b1dc6796c337e8ca3e58b9dd590dc88a265b514ff5f3f56c30} of its exports normally passing through Crimea, where military tensions are running high.
Two major U.S. grain processors with operations in Ukraine — Archer Daniels Midland Co. and Bunge Ltd. — said Monday that their businesses weren't affected by the turmoil but that they were closely watching the situation. ADM runs an inland grain-elevator system, ports and an oilseed processing plant in Ukraine. Bunge runs grain elevators, as well as a port in Nikolaev and a crushing plant in Dnipropetrovsk.
Mr. Glauber said he expected the Black Sea region would remain a major and growing wheat exporter, with productivity gains and more planting area indicating that the zone will have an even bigger influence on the world market, despite political upheaval. “I don't think this changes those longer-term fundamentals,” he said.
While crop prices were at their lowest since 2009-10, Mr. Glauber said grain stocks were still “pretty tight” and demand was strong.
“We've seen global records in terms of consumption. I think we are still vulnerable to a production shortfall somewhere, where you could see prices spike again. That's one reason why you see the volatility that you've seen in the markets on Ukraine.”
Recent record grains and oilseeds crops had helped replenish global stocks after several poor years caused by drought in the U.S., South America and Russia, causing some commodity prices to fall slightly, he said.
“In looking at the spring planting season in the U.S., we're seeing less corn being planted, more soybeans, a little less wheat because of the fact that the Fall-planted crop is a little smaller than it was last year,” he said.
“But we very well could see record corn and soybean crops out of the U.S. if yields are anywhere where we think they might be with normal weather.”
Mr. Glauber said that while Brazil was set to overtake the U.S. this year in soybean output, in the longer term he expected the U.S. to remain the world's dominant corn producer, even if demand continued to slow, as expected, for ethanol fuel derived from corn.
He also expected China, a key driver of agricultural commodity prices, would resolve issues with the U.S. over genetically modified material that has caused some U.S. corn shipments to be refused.
“The current problems that we're having with getting approval on varieties of corn I think is a temporary issue. I think we'll work through that, in large part because at the end of the day China needs feed grains,” he said.
Demand in China for U.S.-produced soybeans also remained strong, as was beef demand, although the outlook there for U.S.-grown wheat and rice was less clear.
“We don't foresee a lot of growth in those grains yet,” he said, predicting that most growth will come in corn sorghum and other feed grains that are going directly into animal feed or industrial use.
Source: Dow Jones
Posted by Haylie Shipp
