GRAINS-Wheat jumps as Ukraine plane crash stirs political worries

* Wheat up on fears political fallout could crimp Black Sea exports

* Corn follows but expectations of big U.S. crop limit gains

* Soy turns down on improving weather view; Argentine strike ends (Updates prices to reflect downturn in soy, adds quotes)

By Julie Ingwersen

CHICAGO, July 17 (Reuters) – U.S. wheat futures surged 2 percent on Thursday, rallying from a recent four-year low on fears of escalating geopolitical tension in the Black Sea region after a Malaysian airliner crashed in eastern Ukraine, traders said.

A Ukrainian interior ministry official said the plane was shot down by pro-Russian militants.

Corn futures were mixed on the Chicago Board of Trade while soybeans turned lower on improving weather forecasts.

Ukraine and Russia are both major global wheat suppliers, and news of the plane crash raised fears that an escalation in a four-month conflict between the two countries could inhibit grain shipments from the region. Ukraine is also the No. 3 global corn exporter.

“It has caught the market’s attention,” Shawn McCambridge, grains analyst with Jefferies Bache in Chicago, said of the crash.

“If it was indeed shot down, it would certainly be an escalation of tensions in the region and would probably open up Russia to some severe consequences as far as additional sanctions or restrictions,” McCambridge said.

At the CBOT as of 12:50 p.m. CDT (1750 GMT), September wheat was up 11 cents at $5.49 per bushel, rallying from a session low of $5.30-3/4 hit before news of the crash.

September corn was up 1-1/2 cents at $3.79-3/4 a bushel and August soybeans fell 11-3/34 cents at $11.75-1/2 a bushel.

Corn drew support from conflict in Ukraine, but not as much as wheat. Commodity funds hold a sizable net short position in CBOT wheat, leaving that market vulnerable to short-covering, while they hold a net long in corn.

Gains in corn also were limited by expectations for a bumper harvest in the United States, the world’s biggest producer. The Commodity Weather Group projected the 2014 U.S. corn yield at 171.0 bushels per acre, which would surpass the 2009 record high of 164.7.

Soybeans fell after updated weather models signalled cooler and wetter conditions for the U.S. Midwest next week.

As well, grain inspectors in the Argentine grains hub of Rosario lifted their strike over wages, although other labor disputes continued.

“The midday American model run came out and it was in more in line with the other models, insofar as any heat next week not staying very long. That put the damper on corn and beans,” said Jim Gerlach, president of A/C Trading. He added: “Obviously we are still retaining some premium in the wheat until we find out what is going on over there in Ukraine.”

Prices at 12:54 p.m. CDT (1754 GMT)               
                              LAST      NET    PCT 
                                        CHG    CHG 
 CBOT corn                  387.50     0.75   0.2% 
 CBOT soy                  1110.00   -11.50  -1.0% 
 CBOT meal                  365.30    -1.10  -0.3% 
 CBOT soyoil                 36.46    -0.47  -1.3% 
 CBOT wheat                 572.00    10.00   1.8% 

(Additional reporting by Naveen Thukral in Singapore and Gus Trompiz in Paris; Editing by William Hardy, Andrew Hay and Meredith Mazzilli)

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