Market Overview

Wheat prices usually move in correlation with energy markets as they have many drivers in common. Wheat is a risky asset which is sensitive to the overall risk appetite in the markets and borrowing costs.

Wheat prices peaked at $1348 per 100 bushels in February 2022 amid geopolitical tensions, an energy crisis, and blistering inflation. Such high price levels have not been seen since 2008. A war between major wheat producers in Russia and Ukraine greatly contributed to the market rally as wheat production declined and Black Sea export routes were disrupted.

However, wheat prices declined for most of 2022 as major central banks started to tighten their monetary policies while production and exports gradually increased. Grain deals opened up Ukrainian ports for wheat exports in July 2022 and contributed to the taming of wheat prices. Wheat futures in December declined to $700 per 100 bushels, the level of autumn 2021 when no crises were in sight. Prices have declined to $700-800 per 100 bushels and are now hovering inside this area. This week they dropped to $714 per 100 bushels.

So far it may seem that wheat prices are close to the bottom with a strong technical support at $680-700. Downside drivers have run out of steam, however geopolitical tensions and export uncertainties are supporting prices. On the other hand, fertilizers, agricultural vehicles, energy, and transportation prices are still at their highs. This increases the incoming costs for wheat producers and does not allow prices to drop further down.

Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.