Wheat Shortage Hints at Massive Grain Prices Breakout

India’s official ban of wheat exports may trigger governments protectionist domino effect that will exacerbate the global food shortage and inflation. The removal of agricultural exports due to the Russo-Ukraine conflict making crops impossible in many Ukrainian grain-rich territories and the fresh Indian ban reduces the fungibility of grains triggering market seizures and chaos.

Teucrium Wheat Fund (WEAT), which is based on wheat futures, has traded within a relatively narrow range the past 30 days, between $10.32-$11.00, and now finally looks ripe for a strong upward breakout.

The popularity and high demand for this fund was articulated in the New York Times article entitled A Market Mystery: The 'Wheat Whale' That Came Out of Nowhere, published on April 8, 2022.

With respect to Ukraine, as we mentioned above, the wheat planting and harvesting season are practically lost because of the on-going war, particularly in the wheat producing area where hostilities are currently considered the most severe.

But not only geopolitical fallout are the ones to blame for the rapidly mounting worldwide grain shortages. Weather conditions certainly multiplied the negative effect.

Thus, India's March heat wave was one of the fiercest on record. According to India’s government sources, they estimate that the heat wave may have damaged upwards of an estimated 25% of the planned wheat crop. Apparently, not least because of this, the Indian government banned wheat exports. This extreme protectionist policy eliminates wheat exports as a stop-gap relief for many import-dependent and poor countries that would have received exports from Ukraine and/or Russia.

Because India is the world's second-largest wheat producer, this removes a considerable amount of additional wheat from the world market. For this reason, wheat and other agricultural foodstuffs may no longer be considered fungible and could wreak havoc in the global markets in the coming months.