Jet Crash Over Ukraine Might Spur Wheat Price Gains
Wheat prices soar as air crash fuels Ukraine fears
http://www.agrimoney.com/news/wheat-prices-soar-as-air-crash-fuels-ukraine-fears--7278.html
Wheat headed for the biggest weekly climb in four months as investors weighed the outlook for exports from the Black Sea region after the loss of a passenger jet over Ukraine spurred concern supply may be disrupted. The contract for September delivery rose as much as 0.7 percent to $5.5475 a bushel on the Chicago Board of Trade and was at $5.545 by 1:59 p.m. in Singapore. Prices jumped 2.4 percent yesterday, the biggest increase since April 15. Futures are set to advance 5.4 percent this week, the biggest weekly gain since the period ended March 7.
http://www.agweb.com/article/jet_crash_over_ukraine_might_spur_wheat_price_gains_BLMG/
Ukraine and Russia are major wheat exporters – not that any sanctions are likely to apply to grain itself, a major source of cheap supplies for, for example, North Africa, but regional instability could affect transportation, or least raise fears of disruptions that persuade buyers to turn elsewhere.
Canada ended up with at least 2 million acres unplanted because of wet conditions.
Ukraine is the world’s No. 6 exporter of wheat, and instability there could cause supply disruptions, sending prices higher.
Cedar
I just did a very rough estimate based entirely on this chart.
Looks to me like Ukraine is responsible for 14% of all the wheat of just these Top Eight producers.
But the real question is: what percentage of the world's wheat are they responsible for?
If we take a guess and cut that 14% in half, that brings us down to 7% of the world's wheat coming from Ukraine (just a guess on my part). And my understanding of shortages and scarcity (based entirely on my petroleum research, especially my studies of the two Energy Crises that struck America back in the 1970's) tells me that any time a supply system suffers a sudden and unforeseeable shortage of 5% or more, it's capable of seizing up the whole system.
This 5% rule only applies to shortages in commodities for which there is absolutely no alternative. Wheat (unlike oil) does have some alternatives. So I do not see the system "seizing up" due to a 7% drop in supply. However, if we continue to see droughts and wildfires inn Australia, Russia, and India, then that 7% loss could get compounded into double-digit numbers, and then the prices will truly get out of hand. And then we might see more food riots in the coming 18 months like what we witnessed back in 2008 in Latin America and parts of the Third World.
