Wheat is in a War-Time Market
Teucrium | February 25, 2022
Front-month wheat futures prices have advanced as much as 23% since January 18th. That was the day US Press Secretary Jenn Psaki told the world that Russia could invade Ukraine “At Any Point.”
On January 21st we published a commentary titled “At Any Point, Wheat in the Crosshairs of War.”
In our commentary we wrote: “…an armed conflict between Russia and Ukraine would likely propel [wheat] prices higher and could lead to a retest of the November 2021 high…”
Wheat prices shot above those November highs on February 23rd and are still trading above those levels as of this writing (I’m writing this pre-market hours on February 25th).
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A Telegraphed Surprise
Somehow, what may have been the most anticipated military invasion in history seems to have caught the markets by surprise. Given the rapid price advance this week, it appears that markets may not have fully priced in the risk of an invasion. Of course, markets may be efficient, but they are not perfect. Traders can both over-react and under-react to headlines. What is clear now is that wheat prices have been trading on headlines. It is a war-time market, and that means we should expect volatility.
This chart is for illustrative purposes only. Teucrium WEAT ETF daily prices 08/25/2021 – 02/24/2022. Source: Bloomberg Finance L.P. Past performance does not guarantee future results.
A word of caution: Volatility works both ways. Prices can head lower as fast as they advance (if not faster).
As of the market close on February 24th our wheat ETF (ticker: WEAT) has advanced more than 20% from the January 18th close. Additionally, we have seen record trading volume over the past three sessions (see chart above).
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