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Wheat futures are again trading with double-digit gains of as much as 18 cents across the three main categories. In the same way, as we named orange juice concentrate the most unambiguously advancing soft commodity this year, wheat, mainly due to geopolitical reasons, would be the most potentially upsurging commodity of the year. The Wednesday, March 29, wheat (Wheat May '23 (ZWK23)) trade left futures in the black by almost 1.3%, though SRW (soft red winter) was a bit lagging behind. CBT SRW ended with 1 ¾ to 2 ½ cent gains in the front months as May went home a nickel under the session high. KC HRW prices closed 1.3% to 1.4% higher with double-digit gains. Spring wheat futures on the MGE were also up by double digits on Tuesday as the front months ended up by as much as 11 ½ cents. 

CME reported a 3.9K contract decrease in CBT wheat futures, but a 3.2K contract increase to SRW options in the Tuesday session. Most of that future’s liquidation was via the May contract, and May calls were the most popular. 

Wheat futures are getting a major boost from some news from Russia and Ukraine, including wide citations that Russia considers current world wheat prices too cheap, including U.S. futures on the CBOT. Sources later told Reuters that Russia had no plans to halt wheat exports but wanted exporters to ensure prices paid to farmers were high enough to cover average production costs. Fund managers holding large short positions are nervous, especially amid signs that Russian exporters may be refusing to accept tenders below $275 per metric ton, and some say that floor is rising to $285 – $290 per ton.

The perception that high Russian offers and cheaper Russian prices will be a feature of global markets for some time are the drivers behind the unjustifiably frothy prices. Many traders also think that wheat prices are so cheap now that Russia is reportedly considering raising export tariffs or temporarily halting exports to help prices recover. as CBOT wheat futures are down nearly 13% so far this year.

On top of that, according to Bloomberg, Russia said top agricultural commodities trader Cargill Inc. will stop exporting its grain, adding to uncertainty over the future of the Black Sea crop shipments. Initially, on the news, the most-active wheat contract on the Chicago Board of Trade (CBOT) Wv1 rose 2.1% to $7.14-¾.

Agricultural markets are likely to seek direction from a U.S. planting report due on Friday.
 

Summary:

Once again, for those who seek good Return/Risk opportunities in the agricultural commodities markets, wheat can be by far the best choice. Future developments concerning the Black Sea Grain Deal are anything but clear and straightforward, so any weather deterioration or any other unexpected contributing factor can serve as a spark plug to stage another episode of price rally in the wheat, and it isn’t either forecastable or quantifiable matter.

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