Along with the cloudy outlook over Iraq’s oil supply, the sectarian strife could also hinder the country’s wheat supply, potentially providing a pump in the wheat related exchange traded fund.
The Teucrium Wheat Fund (NYSEArca: WEAT) has decreased 14.9% year-to-date on higher global production.
CBOT wheat futures are trading around $5.37 per bushel.
In Iraq, fighters from the Islamic State have taken over five of the country’s most fertile provinces, which the United Nations food agency calculates produces about 40% of the state’s wheat, Reuters reports.
For now, the confiscated wheat is finding its way into the international markets. The Islamic State has extensive business dealings, including the sale of oil, gasoline and food sources, to raise funds.
However, an estimated 400,000 farmers are living under militant rule with no hope of being paid for the wheat they delivered to the Iraqi government before the Islamic State’s offensive. Consequently, Fadel El-Zubi, the U.N. Food and Agriculture Organisation (FAO) representative for Iraq, warns that farmers will not have the capital to start planting for the seeding season that begins next month in some areas.
Additionally, John Schnittker, a former USDA economist who advised the Trade Ministry, also believes that threats to irrigation water, the government’s inability to get fertilizer to farmers and producers leaving their homes will all pressure Iraq’s next wheat crop. [Commodity ETFs Could Turn Around]