The Teucrium Wheat (NYSEARCA:WEAT) exchange-traded fund (ETF) is up 12% this morning as wheat prices hit record highs amid fears of a global shortage.
Wheat prices have been surging in recent days along with most other commodities following Russia’s invasion of Ukraine. The price of wheat has risen 37% so far in 2022 after rising more than 20% in 2021. Inflation has played a part, but so too have the economic sanctions placed on Russia amid its attack on Ukraine.
What Happened With the WEAT ETF
Importantly, Ukraine is viewed as key “breadbasket” in Europe. Why? The country accounts for 12% of the world’s total wheat exports, according to the U.S. Department of Agriculture. It also supplies 16% of the world’s corn exports. With investors expecting a drop in production and exports from Ukraine, wheat prices are skyrocketing.
At the same time, global shipments are in chaos as Russian freighter ships are barred from entering several countries around the world. Some countries have also ceased accepting Russian agricultural exports. The situation has pushed up the WEAT ETF 60% year to date to nearly $12, bringing its gains over the past six months to nearly 70%.
Why It Matters
Wheat prices are likely to run higher in the near term as the Russia-Ukraine conflict plays out. In addition to Ukraine being a major global supplier of wheat, Russia also plays a vital role in the global agricultural market, exporting key ingredients needed to make the fertilizer that farmers rely on.
Inflation is also an ongoing issue that is impacting wheat and commodity prices. Currently, inflation is running at a 40-year high in the U.S., partly driven by rising food costs. Food producers are hiking prices and passing the costs they’re incurring onto consumers. Rising prices are fast becoming a political issue in the U.S. ahead of mid-term Congressional elections this fall.
What’s Next for Teucrium Wheat
The Teucrium Wheat ETF can be expected to continue moving higher in the near term as prices for wheat and wheat products around the world spike higher. Some relief might come as the Federal Reserve begins to raise interest rates and tighten monetary policy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
