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Home » Popular Markets » Commodities » Wheat and corn price volatility over Russia Ukraine tensions

Geopolitics is spilling into the agricultural commodities market as two of the world’s top exporters of wheat and corn, Russia and Ukraine, are teetering on the edge of conflict.

For the moment there are no significant disruptions to exports from the Black Sea region and traders are playing it cool – wheat prices are only a notch higher. But there are real concerns that grain flows from the two countries could start facing more substantial disruptions which would eventually force importers to look for alternatives either in Europe or the US.

Trade CORN here
Atlantic . IG
Russia, the world’s largest exporter of wheat, mainly ships grains to the Middle East and Africa where it competes with European Union suppliers. Ukraine, the world’s fifth largest wheat exporter and the third largest exporter of corn, is selling into the same markets.

Potential supply disruptions could also be a positive signal for shares of large global commodity traders like our tactical trading pick Glencore PLC (LON.GLEN). The Swiss-based firm has just expanded its global reach with the acquisition of the US-based grain business Gavilon from Japan’s Marubeni this week.

Corn prices are reacting much stronger than wheat and since the start of the year US corn futures have rallied to an eight-month high of 627 cents a bushel (CBOT March corn). The rise in CBOT wheat was less pronounced and March futures are now trading at their highest since last November at 822c/b. In Europe, Matif March corn futures are at €258 a tonne, up €11.5/t since the start of the year while Matif March wheat is quoted at €279/t, €5/t higher than at the beginning of January.

Fundamental picture

Before geopolitics came into play “wheat prices had started the year on a weaker footing after the United States Department of Agriculture (USDA) reported that it expects the global wheat balance to loosen,” noted ETF specialist WisdomTree in its latest commodities markets report.

Earlier in January the USDA revised upwards its 2021/2022 global wheat ending stocks expecting that higher prices would start affecting wheat consumption and lead to lower demand. What the agency didn’t mention is that the change in the Western diet and the popularity of low-carb diets like Keto has started impacting demand in Europe and the US. The USDA modestly revised upward its expectations for global production after the EU and Argentina said they expect to produce more wheat than initially planned.

The US agency painted a stronger supply and demand picture for corn, revising down their global inventories expectations.

Russia curbs its plans for wheat exports

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Even before the sabre rattling over Ukraine started, Russia indicated that it would export less wheat this year. The country wanted to avoid an increase in wheat prices at home following a smaller crop and decided to restrict exports to 8 million tonnes of wheat rather than sell the initially planned 9 million in the period between February and end of June.

The tensions between Russia and Ukraine are adding to global supply chain problems caused by Covid which are slightly beginning to ease but are not over yet. These issues contributed to a rise in agricultural commodities’ prices, boosting the Bloomberg TR Agriculture index by 19.7% over the last 12 months.

While the Ukraine situation remains unresolved both corn and wheat prices will remain under upward pressure unless the supply picture changes dramatically.

Explore WisdomTree related ETFs

Product NameISINExchange TickerListing Currency
WisdomTree Corn
Hargreaves Lansdown | Interactive Investor AJ Bell Youinvest | Charles Stanley Direct | EQi
GB00B15KXS04CORNUSD
WisdomTree Wheat
Hargreaves Lansdown | Interactive Investor | AJ Bell Youinvest | Charles Stanley Direct | EQi
GB00B15KY765WEATUSD

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Vanya Dragomanovic

Vanya Dragomanovich

Vanya is an award-winning financial journalist who has worked in both television and newswires. She spent over 10 years at Dow Jones covering commodity markets, including metals, coffee, cocoa and oil. She also reported from the floor of the London Metals Exchange, and appeared on CNBC to discuss international metals markets. Since then she has written for several leading financial publications, including serving as commodities editor for FTSE Global Markets.

Vanya continues to cover international commodities markets globally, specialising in particular on metals and alternative energy. She is also the author of a book on CFD trading.

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