CHICAGO, March 4 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.
Major grain companies, including Archer Daniels Midland Co and Bunge Ltd, say grain shipments have not been slowed by the turmoil in the region, but that they are monitoring developments.
Most have expanded their reach in recent years with investments in elevators and port facilities in key production areas around the globe.
"We feel we're well positioned globally to serve our customers from other origins, if necessary," said Bunge spokeswoman Susan Burns.
BLACK SEA COSTS RISING
The global market may be stable, but Black Sea markets are not. Shippers have begun building so-called risk premiums into freight costs in and out of the troubled Black Sea region in case the crisis escalates.
Meanwhile, with the Ukrainian and Russian currencies both slumping, farmers have little incentive to unload grain now. They expect that as the dollar appreciates, they could earn more for their corn.
The grain available for export from the region could tighten further if economic sanctions against Russia put pressure on a rouble that already has weakened despite the Putin government's efforts to support the currency by raising interest rates, said Kevin Van Trump, chief executive of Farm Direction, a consultancy based in Raymore, Missouri.
"The producers might get more tight fisted with the bushels they're producing and hunker down," Van Trump said. "They're just not going to sell to the exporter."
Grain buyers will adapt. Upcoming international tenders for the purchase of grain likely will be listed for "optional origin" instead of listing Ukraine or Russia specifically, said Helen Pound, senior commodity specialist with KCG Futures.
"If you have got a choice between buying from that part of the world or buying elsewhere, wouldn't you demand a big discount at this stage, or go elsewhere because you would have more certainty of getting the grain you bought?" Pound said.
Grain markets likely will remain volatile in the near term. Even an apparent easing of tensions on Tuesday did not manage to ease traders' concerns altogether.
"It's extremely fluid. It could have extreme repercussions or almost none by the time we get to the next two to four weeks," said Bill Lapp, head of Omaha-based consultancy Advanced Economic Solutions.
"There was a similar mindset when Chernobyl hit and you were wondering what was going to happen when you eliminate a significant amount of grain off the face of the earth," he said.