A Warmer-Than-Expected Summer Could Push Wheat Prices Higher

Wheat prices could stay elevated through the summer if climatic forecasts of hotter, dryer weather persist. With inflation sticking around longer than expected, this presents an ideal hedging opportunity.

Additionally, the Russia-Ukraine conflict remains a catalyst for spurring the price of wheat higher. With global central banks wrestling with monetary policy, the overall expectation is that rate increases will continue to be on the horizon, which puts agricultural commodities like wheat in play in order to hedge out rising consumer prices.

“Expectations of an unusually hot and dry summer, combined with the impact of the war in Ukraine, will probably send wheat prices surging by about 20% from current levels as early as April, experts say,” a Barron’s article said.

“Drought will return and hurt spring wheat, not only in the U.S. but also in other places,” said Shawn Hackett, president of Hackett Financial Advisors in Boca Raton, Florida, which also provides agricultural commodities analysis.

Wheat Prices to Rise in Japan

Geographically speaking, Japanese consumers will be seeing the byproduct of higher wheat prices. The country plans to raise prices, specifically on imported wheat to Japanese flour mills.

“Japan will raise the price at which it sells imported wheat to domestic flour mills from April by an average 5.8% from the previous year to reflect higher import prices over the past six months, the farm ministry said on Tuesday,” Successful Farming reported. “The price rise would have been 13.1% if calculated according to the standard formula, but it was lowered to soften the burden on households suffering from higher commodity prices, the ministry said.”

Given the weather and geopolitical factors, getting wheat exposure can offer investors a non-correlated asset that, as mentioned, can serve as an inflation hedge or an asset diversification tool. One fund to consider is the Teucrium Wheat Fund (WEAT), which offers an easy way for investors to gain exposure to the price of wheat futures in a brokerage account.

For more news, information, and strategy, visit the Commodities Channel.