Prices Stabilises As Ukraine Distribution Returns

Following a spike in prices earlier this year in reaction to Russian invading Ukraine, wheat prices have since reversed sharply lower and are now trading back around where they were priced ahead of the invasion. The reopening of some supply routes out of Ukraine has been a major factor in helping prices stabilise. Recently, a diplomatic deal to allow for the reopening of Ukrainian ports in the Black Sea has been a major factor helping to restore price stability to wheat prices. The deal, signed at the end of July has seen Ukraine working hard to get back to pre-invasion export levels and, while not there yet, the encouraging trajectory is helping calm traders’ nerves. Similarly, strong harvests recently in North America as well as Russia have helped supress the surge in prices.

Looking ahead, the projections for wheat pricing appear skewed towards the downside. If Ukraine can continue to rebuild its distribution and get back to pre-invasion levels, or if the war between Russia and Ukraine comes to an end, even temporarily, this will help drive wheat price slower near-term. Additionally, the ongoing rally in the US Dollar, which looks likely to continue with Fed tightening into year end, should help keep prices weighted also.

Technical Views

ZW – Wheat Futures

The correction lower in wheat prices has seen the market trading back down to test the rising trend line from YTD lows. This area, along with the 740’2 level, has underpinned the market for now. However, while price holds below the 873’4 level, the focus is on a further push lower near term and a break of current lows, targeting 618’6 next. To the topside, a break of the 873’4 level puts 976’6 back in view.