The conflict in Ukraine continues to put supply constraints on the global food crisis, forcing prices of wheat and corn to rise. This was further exacerbated recently by Russia nixing a grain exports deal that could help alleviate the crisis.
Russia’s occupation of the Black Sea is preventing exports of agricultural commodities, including corn and wheat, from leaving Ukraine. As such, the forces of supply and demand are weighing heavy on food prices that are already on the move higher amid inflation.
According to a CNN report, the grain exports deal has been helpful in at least allowing some exports to leave Ukraine. However, an apparent drone attack amid the ongoing conflict between the nations forced Russia to pull out of the deal completely.
“The United Nations-brokered deal, which was agreed to in July and ensured the safe passage of ships carrying grain from Ukraine through the Black Sea, has played a crucial role in lowering the prices of wheat and other commodities globally,” CNN noted.
2 ETFs for Consideration
Rising wheat prices should benefit exchange traded funds (ETFs) that focus on the commodity, such as the Teucrium Wheat Fund (WEAT). The fund can be used as an ideal inflation hedge as wheat prices continue to rise alongside rising commodity prices, or investors can use the fund to add commodities to their portfolios for diversification.
ETF investors looking to get exposure to rising corn prices following the act becoming a law or to simply add diversification to a portfolio with commodities can take a look at ETFs from Teucrium. More specifically, they can look at the Teucrium Corn Fund (CORN).
CORN tracks three futures contracts for corn that are traded on the Chicago Board of Trade, including 35% second to expire contracts, 30% third to expire contracts, and 35% December following the third to expire. The various contract exposures help the fund limit the negative effects of rolling contracts, especially during a market in contango.
While commodities have fallen as of late, this could be an ideal area of value for short-term traders. Should they rise again, it provides an ideal hedge against inflation.
For long-term buy-and-hold investors, getting corn and wheat exposure can provide an ideal hedge against inflation. Getting alternative assets that are non-correlated to the broad market can offset any weakness in the equities or bond market.
For more news, information, and strategy, visit the Commodities Channel.