Ukraine Turmoil Seen Boosting U.S. Grain Exports as Corn Rallies

Urkaine’s escalating turmoil is signaling that grain buyers may be forced to import more from the U.S. as corn prices rally to a six-month high.

Farmers in Ukraine are holding commodity supplies to hedge against a devaluing currency, slowing shipments, according to Cary Sifferath, a regional director for the U.S. Grains Council. Buyers in Asia may be reluctant to purchase from eastern Europe on supply-disruption concerns, according to Jefferies Bache LLC. Ukraine was projected to be the world’s third-biggest corn exporter and sixth-largest wheat shipper this season. The U.S. is the top shipper of both grains.

Russia’s troop buildup in Ukraine’s Crimean Peninsula roiled grain markets this week. Corn futures climbed to the highest since September in Chicago today, rebounding from last year’s 40 percent plunge. Yesterday, wheat reached the highest in 12 weeks. Black Sea port and shipping operations mostly continued as normal, according to Western Bulk ASA, which runs 120 commodity vessels.

The Russian military actions “ caught everyone off guard, because grain prices were at the low end of the five-year range,” Diana Klemme, vice president Grain Services Corp., an adviser and cash grain broker in Atlanta, said in a telephone interview. “Anything that disrupts export shipments or planting of crops has to be viewed as bullish. If shipping problems develop it will boost demand for U.S. grain.”

Corn futures for May delivery slid 0.5 percent to settle at $4.82 a bushel at 1:15 p.m. on the Chicago Board of Trade, after touching $4.88, the highest since Sept. 3.

Currency Drops

Ukraine’s hryvnia, which reached a record low on Feb. 27, has fallen 12 percent against the dollar this year. A weaker currency increases the cost of imported crop inputs while boosting the value of grain held in storage.

“Ports are open and vessels are loading, but shipments are becoming increasingly difficult,” Sifferath said in an e-mailed statement. “We hope for a peaceful and speedy resolution of Ukraine’s crisis, but the instability is creating opportunities for additional U.S. exports to North Africa, the Middle East, and China.”

Of the 18.5 million metric tons the U.S. government projects Ukraine will ship this season, about 5 million hasn’t left the country yet, said Shawn McCambridge, the senior grain analyst at Jefferies Bache LLC. The nation still has about 2 million tons of wheat left to ship before June 1, he said.

“The events are evolving very quickly, and Asian grain buyers are going to shy away from any new purchases from either Russia or Ukraine,” McCambridge said in a telephone interview from Chicago. “Buyers will work down any cargoes they have and look to other suppliers for new purchases.”

Korea Purchases

U.S. exporters reported sales of 211,500 tons of corn to Japan and 140,000 tons of the grain to South Korea, the Department of Agriculture said March 3. Korea Feed Association, the country’s biggest grain-buying group, said March 4 that it has no shipments scheduled for delivery from Ukraine and that worsening turmoil would limit choices for traders to supply grain buyers.

Ukraine’s corn planting starts in the next 30 to 45 days, and credit availability may restrict the ability of farmers to plant all the acres intended, the Grain Council’s Sifferath said. Farmers also face an intensifying drought in parts of central and eastern growing regions, according to Martell Crop Projections.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net

To contact the editor responsible for this story: Millie Munshi at mmunshi@bloomberg.net

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