A combination of weather-related events looks set to cause sharp frosts that will hurt the forthcoming wheat crop, experts say.
“Upside volatility risks are growing for the winter wheat market,” writes Shawn Hackett, in a recent edition of The Hackett Money Flow Commodity Report.
In other words, get ready for another surge in prices for the grain.
Last year the invasion of Ukraine sent wheat prices up to near $13 a bushel in mid May as traders worried that the fighting could halt the harvest or disrupt shipping of vital grain supplies through the black sea. Ukraine is one of the largest exporters of grain in the world.
However, the feared shortages weren’t as bad as first anticipated, and subsequently prices dropped resting at $7.10 recently, according to TradingEconomics.
However, wheat futures on the CME are likely to head back higher due to brutal frost snaps in March.
“These kinds of Flash Frosts can be particularly detrimental to the winter wheat areas of the US, EU, Russia and China,” states the Hackett report. “Many winter wheat areas would be coming out of dormancy with no snow cover and would be particularly vulnerable to such a flash frost.”
Snow tends to form an insulating blanket over the germinating wheat plants, so protecting them from the cold. However, without the snow the burgeoning wheat crop would likely get damaged in the event of a harsh frost.
Hackett expects the devastating frost to likely to occur in the second half of March.
Such events will likely send wheat prices back higher, although probably not to the stratospheric levels seen last May
Savvy traders should consider purchasing May-dated contract for Hard Red Winter Wheat on the CME. Alternatively try the Teucrium Wheat exchange-traded fund ETF (WEAT
WEAT
There are risks, most notably forecasting weather accurately is notoriously tricky.
However, the uncertainty regarding the ongoing conflict in Ukraine will likely help keep wheat prices higher than they would otherwise have been