The War in Ukraine is perhaps the most impactful conflict in commodity markets. On the one hand, it affects the hard commodity market. The price of oil and gas dramatically fluctuated since the war started because Russia is one of the largest oil and gas suppliers. On the other hand, this conflict affects the soft commodity market since Ukraine is among the largest suppliers of agricultural commodities. As a matter of fact, the war negatively impacted African countries since they are the major importers of agricultural products from Ukraine.
Recently, agricultural commodities have been higher as the Russia-Ukraine conflict continues to escalate. In particular, the collapse of a major dam in southern Ukraine translated to higher wheat and corn prices. Surrounding the dam are sizable agricultural fields, putting crops in danger. Oil escaping from the dam machinery and massive flooding could also cause extreme environmental harm, including the pollution of drinking water.
According to Sergey Feofilov, head of UkrAgroConsult, the short-term impact of this surge in agricultural commodities is the damage of grain silos and other equipment situated on the low banks of the river. And the long-term impact could even be more dramatic.
“Ukraine has historically been one of the major exporters in the world wheat market. Anytime there’s news out of that part of the world, the market is sensitive to that,” said Joe Janzen, Assistant Professor at the University of Illinois Urbana-Champaign’s College of Agricultural, Consumer, and Environmental Sciences.
Traders who want easy access to rising wheat and corn prices can look for products from Teucrium. For what, the Teucrium Wheat Fund provides investors with an easy way to gain exposure to the price of wheat futures. Those looking to trade corn use the Teucrium Corn Fund, which tracks three futures 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.
The conflict could propel the overall agricultural commodities market higher. Short-term traders or long-term investors who want an all-encompassing approach can use the Teucrium Agricultural Fund, which is essentially a fund of funds and it features a low 0.13% expense ratio, combining exposure to corn, wheat, soybeans, and sugar through other Teucrium funds that focus specifically on these commodities.
China’s surplus of wheat could be decimated by heavy rain and high humidity, according to the South China Morning Post. Thus, it could give bullish wheat traders signs of life. The second-largest economy represents the world’s largest producer and consumer of wheat. The strategy to shift from corn to wheat for animal feed is certainly affected by this recent harsh climate.