Bullish wheat traders are feeling the pinch from all parts of the globe. That’s because various producers and consumers could affect how prices will look for the commodity in the second half of 2024.
Nonetheless, Chicago SRW wheat futures are up 2% overall. They are mostly trading sideways to start the year before ticking higher during the month of May. That upside will be tested domestically as U.S. producers are looking at “larger supplies, modestly higher domestic use, increased exports, and higher stocks.” That’s based on a May World Agricultural Supply and Demand Estimates report, as noted by the High Plains Journal.
In Ukraine, The Kyiv Independent noted that the U.S. Agriculture Department’s report revealed a rise in Russian wheat exports in the past decade. But that could drop within the next year as harsh weather conditions could hamper production. That only adds to the already-existing price pressures from the ongoing Russia-Ukraine conflict where the disruption of shipping lanes in the Black Sea is affecting exports. That could add bullish price pressure in the meantime. But there’s another force in Asia that could pull prices down.
Downward Price Pressure in China
China could add downward price pressure. That’s because a Bloomberg report noted that the appetite for wheat in the second largest economy has been seeing diminishing returns as of late. In instances of oversupply, China will typically offset that with its voracious demand for wheat. But that could be tested and thrust pressure on world grain markets.
“Buyers in China haven’t been observed making any major purchases for a couple of months, according to a number of traders,” the Bloomberg report said. “With domestic prices so low, that trend is likely to continue through the third quarter, they said, declining to be identified discussing sensitive commercial matters.”
Despite the falling prices, this could present a buy-in opportunity for those looking to diversify their portfolios with agricultural commodities. For short-term traders, it could present an area of value should wheat prices hint toward the upside in the future.
Either way, long or short erm, investors can take a look at the Teucrium Wheat Fund (WEAT). It offers an easy way for investors to gain exposure to the price of wheat futures in a brokerage account. Long-term investors looking to add wheat to their portfolio as a diversification component can use WEAT. Short-term traders can use the fund to get exposure to wheat futures without having a margin account.
For more news, information, and analysis, visit the Commodities Channel.