Prospective investors looking for alternative assets for diversification may want to consider wheat prices as the bullish case for the commodity continues to build. That’s especially the case when taking into account the current geopolitical landscape as well as the typical weather concerns.
Wheat prices have been trending lower since the apex in 2022 after Russia invaded Ukraine, reaching a point where market experts were positing that a major supply disruption would be necessary for prices to reverse the trend. That may come if Russia, the third top producer according to World Grain, continues to experience inclement weather that isn’t conducive to crop growth.
“Concerns over crop prospects in Russia’s southern Caucasus region, a major source of the country’s wheat exports, gained extra potency with weather maps showing the area staying largely dry through the first week of May,” noted CRM Group analysts per a Bloomberg report. “Some worries remain too about the potential for some losses in Europe to recent frosts.”
Additionally, harsh weather conditions domestically could also crimp supply.
An Ideal “Geopolitical Hedge”
As previously mentioned, the harsh weather component is paired with the geopolitical landscape, potentially giving wheat prices further tailwinds. On top of the Russia-Ukraine conflict, tensions in the Middle East are also a cause for concern that could disrupt the global wheat supply. In turn, this could make wheat an ideal geopolitical hedge given the ubiquity of wheat worldwide.
“In terms of geopolitical hedges in Ag commodities the wheat market takes the prize,” said Shawn Hackett, via the Hackett Money Flow Commodity Report. “It is likely to outperform most other geopolitical hedges during this period of time.”
“In an escalating world war type situation wheat supplies are a must-have for half the world and grown in almost every country,” Hackett added further.
Investors looking to add wheat exposure without the complications associated with learning how to trade futures contracts can consider the Teucrium Wheat Fund (WEAT). The fund offers an easy way for investors to gain exposure to the price of wheat futures in a brokerage account. Long-term investors looking to simply add wheat to their portfolio as a diversification component can use any current weakness to get exposure to wheat at a value-oriented price.
WEAT offers the ability to get exposure to wheat futures without having a margin account. Additionally, the grain can also serve as an inflation hedge should consumer prices continue to rise unexpectedly.
For more news, information, and analysis, visit the Commodities Channel.