Wheat reaches highest prices in 14 years in the US

Wheat reaches highest prices in 14
  • Russia and Ukraine, leading countries in the current war, are at the same time two of the largest producers and exporters of wheat.
  • Between the two nations, they monopolize almost 30% of the world market for this raw material.
  • Russia is expected to block wheat trade to the United States in response to the sanctions.

Amid fighting between Russia and Ukraine, wheat in the United States reaches the highest prices since 2008. Investors’ nervousness increases as the war progresses. Thus, the futures of this commodity are trading this Tuesday at $984 cents per bushel.

It is noted that the bushel is the unit of measurement for wheat and other dry materials. It is equivalent to about 35.2 liters. It is feared that the war between these two countries will cause a strong disruption in the market for this raw material.

It should be noted that Russia is the world’s largest producer and exporter of wheat and would be pleased to stop selling it to the West. Likewise, Ukraine is among the four largest exporters of this same material, which multiplies the already great concerns in the demanding markets.

Wheat reaches highest prices in the United States

What will happen to wheat prices?

Now it is difficult to be certain what will happen to wheat prices, a commodity that is now at a 14-year high. However, it is almost certain that Russia will not hesitate to respond to the multitude of sanctions imposed by the United States against it. Precisely, the Kremlin would be attacking the weakest points of the US economy.

It should be noted that there are several of the latter and Russia has probably already identified them clearly. Along with wheat, there are other raw materials such as oil, corn and strategic materials such as neon gas, necessary for the chip industry.

All these products have already begun to show high prices in the market, forcing certain actions of the countries of the Western Hemisphere. For example, with regard to oil, some consumer countries announced releasing 60% of their reserves to try to relieve this market that threatens to rise to $150 dollars per barrel.

In any case, the prices reached by wheat seem to be one more of the negative manifestations of the war and the sanctions against Russia. This is a growth of close to 6% during the day on Tuesday. A flood was only comparable to that of 2008.

Why does the value depend so much on Russia and Ukraine?

As already highlighted, both Russia and Ukraine are two of the world’s largest producers and exporters. With just one of these countries in trouble, it would be enough to alter the trade value of this commodity. However, it is precisely the two countries that are fighting a war with each other, which increases the uncertainty in prices.

Consequently, the Russian Federation accounts for 17% of the 207 million tonnes of world wheat trade. At the same time, Ukraine occupies a very close position with 12% of this market. In other words, the two nations, are responsible for nearly 30% of the world’s wheat trade. These data correspond to Bank of America, quoted on CNBC.

In this way, the context is reached in which wheat prices can hardly go down or stay where they are. With almost total certainty they will rise, especially if the Kremlin decides to put pressure, blocking the sale to the United States or its partners. Other large producers would take longer than desired to adapt their production to fill the void left by this Russian commodity.

It should be noted that both wheat and corn are two of the raw materials most exposed to price volatility in extraordinary situations. The latter is assured by experts from JP Morgan.