Wheat ETF Grows as Drought Conditions Decimate Supply | ETF Trends

A wheat-related exchange traded fund jumped Thursday, with wheat prices hovering around their highest level in over five years, as scorching hot weather dries up the grain fields.

Among the best performing non-leveraged ETFs of Thursday, the Teucrium Wheat Fund (NYSEArca: WEAT) increased 2.7% on over three times its average daily trading volumes. WEAT has gained 9.2% over the past three months.

WEAT YTD Performance

“It is so dry out west, we haven’t had a measurable rain in south central Kansas, in the Wichita area, in over a month, since Sept. 11,” Justin Gilpin, chief executive officer of Kansas Wheat, told World-Grain. “It is dust-bowl-like conditions in eastern Colorado and southwest Kansas.”

“If you think about soil profiles being a bank account of moisture, we’ve just really made a lot of withdrawals, drawing on that moisture and just haven’t made the deposits,” Gilpin added.

Around 36% of U.S. winter wheat production is situated within areas suffering from drought by mid-October, according to the US Department of Agriculture, with the most severe rating, exceptional drought, affecting relatively small areas in eastern Colorado and the Texas panhandle.

It isn’t just U.S. that is experiencing drought conditions, extreme dryness and heat in Russia is another factor in the global price surge, the Wall Street Journal reported.

According to the U.S. National Oceanic and Atmospheric Administration, the three months from June through August made up the hottest summer ever recorded for the entire Northern Hemisphere.

“The window to get [winter]wheat crops germinated and established before dormancy is narrowing quickly,” Chicago-based RJO Futures said in a note. “A continued lack of rain over the next few weeks could significantly hurt development.”

Meanwhile, the coronavirus has driven strong demand for basic foodstuffs, added to logistical challenges to harvests and impeded supply chains.

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