Wheat price hit 2008 highs as Russia-Ukraine war disrupts supply
- Earlier on Wednesday, wheat price rose to a 2008 high by rallying past $10 per bushel.
- Russia and Ukraine account for over 25% of the global production.
- In an already tight market, Russia-Ukraine war is threatening a rise in global food prices.
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Wheat price has risen to a 2008 high; trading above $10 per bushel. The rallying recorded in the past month has intensified as Russia’s attack on Ukraine impacts supplies. The situation is rising concerns over the surge in food prices, food insecurity, and a rise in inflation.
Russia and Ukraine account for over a quarter of the global wheat exports. As such, the ongoing crisis has the capacity to alter the delicate supply-demand balance. Notably, the war and subsequent sanctions from the West have shaken the grain markets.
Importers are hesitant about conducting business in the region and paying the surging costs of renting and insuring a vessel to obtain cargo from the war-torn area. In fact, companies such as Archer-Daniels-Midland Co. and Bunge Ltd. have closed facilities in the area.
The supply concerns come at a time when supplies were already tight. Labour shortages and unfavourable weather conditions were largely behind the dwindling output. At the current state, importers are rushing to other nations for wheat. Based on the recent rally, the world may have to deal with a surge in high food prices, food insecurity, and overall inflationary pressures.
Wheat price technical outlook
Prior to the rallying that escalated in the past week, wheat price has been trading below $9.00 per bushel since late 2012. Since Friday last week, it has soared by over 20%.
Earlier on Wednesday, it hit its highest level since March 2008 by surpassing the psychologically crucial level of $10 to $10.59. At that level, it was in the overbought territory with an RSI of 81 The wheat futures in Chicago have since eased to $10.27 as at the time of writing.
On a four-hour chart, it is trading above the 25 and 50-day exponential moving averages. With an RSI of 72 it is at the periphery of the overbought zone.
In the short term, I expect wheat price to record a further decline from the multi-year high attained earlier on Wednesday even as it remains on an uptrend. From that perspective, it may trade within a range of Wednesday’s high of $10.59 and the crucial support level of $10.00. Below the range’s lower border, it may find support at around $9.84.