Factors in Favor of Wheat Futures’ Parabolic Price Growth Reinforce Each Other

Chicago wheat climbed on Tuesday as worse-than-expected U.S. crop conditions added to global supply concerns already culminating in conjunction with the Russia-Ukraine conflict. The U.S. Department of Agriculture reported winter wheat is in 30% good-or-excellent condition, a record low and well below the 53% reading at the same time last year. The U.S. Department of Agriculture on Monday rated just 30% of the U.S. winter wheat crop good to excellent, 10 points below analysts expectations, highlighting drought risks for many U.S. growers.

U.S. hard red wheat ratings are the lowest on record and point to a 10%-20% drop in U.S. hard red wheat crop on record vs. trend depending on April/May weather conditions, which will make the weather forecasts for wheat-growing Plains areas the second most important potentially dehabilitating factor in the coming weeks, according to AgResource.

Corn and soybeans are also moving also higher, spooked by the U.S. farmers weigh last-minute planting decisions. The most active wheat contract on the Chicago Board of Trade (CBOT) ended 35 cents higher at $10.45-1/4 a bushel.The ETFs of interest in this respect are: WEAT, SOYB, CORN, NYSEARCA:DBA, MOO, JJA, JJGTF, GRU.

The Dow Jones reported, that “Continued stress on exports coming out of the Black Sea is providing support for grains, particularly wheat (W_1). Ports are closed in Ukraine and Russian shippers and exporters are not offering in part due to sanctions but mostly due to the ongoing military operation and the chance to lose ships".

Having said that, global demand for grains should remain robust and even elevated in respect to importers’ natural desire to add up to their strategic food reserves given the supply tensions created by the current geopolitical fallouts, where Russia and Ukraine are the two of the world's biggest grain exporters with combined wheat exports accounted for around 30% of the total global wheat shipments.