How to Trade the Potential for Higher Wheat Prices

Jul 19, 2023
Wheat meadow. Ripe Gold Barley field in summer. Nature organic Yellow rye plant Growing to harvest. World global food with sunset in farm land autumn scene background. Happy Agricultural countryside.

Keep an eye on the Teucrium Wheat ETF (WEAT), and other wheat-related stocks, such as MGP Ingredients (MGPI), Bunge (BG), and Adecoagroo (AGRO).

With an expense ratio of 0.28%, the ETF provides investors a way to gain access to wheat futures in their brokerage account. Today, for example, WEAT gapped higher – and could see higher highs – on news that 60,000 tons of grain were destroyed in a Russian attack on Odesa Oblast. Ukraine, by the way, is the fifth largest exporter of wheat in the world.

According to Reuters, “Russia attacked the Odesa region for the second consecutive night after quitting on Monday a year-old deal allowing the safe passage of Ukrainian grain through the Black Sea, a decision that prompted the United Nations to warn it risked creating hunger around the world.”

This happened as Russia pulled out of a deal, which allowed Ukraine to export grain.

However, “losing actual wheat is far different than the potential impact of an ended deal. The markets have shown a remarkable ability to adjust to restrictions on Russian oil, and likely would have found a way to get Ukraine wheat to end markets. But destroyed wheat can’t be replaced. Higher wheat prices could ultimately translate into higher food prices, and cause inflation to rise,” as noted by Barron’s.

In short, we could be looking at quite a mess.

Once the crisis cools off, and wheat futures get back to some sort of normalcy, we can also trade the short side of the stocks mentioned above, too.