If you've been following my comments on wheat, you know I've been talking about the five-year cycle in wheat, and why the market was due for a bottom and new move higher. I've also been cautioning patience. Vladimir Putin could use some lessons in that regard, but his move into Ukraine's Crimea sent shock waves through the market that could be proving a bottom is in.
I say "could" because of what happened the last time wheat surged on a big international storm from Ukraine. The year was 1986, when the Chernobyl nuclear plant melted down. The disaster was an environmental nightmare that continues today. But its impact on the wheat market only lasted a couple of days, when it became clear winds wouldn't blow radioactive contamination all over Europe.
War is a different animal. The closely analogy may be the experience of crude oil, which has seen multiple moves on war in the Middle East. Sometimes the spikes were part of a long-term trend higher, such as in the 1970s. Other times the impact was severe but relatively short-lived, like after the first Gulf War in the early 1990s. The long-term move higher after the 2003 Iraq war appears like more part of a move by investors into commodities, rather than a result of a specific event.
To be sure, Ukraine, and Russia, too, are major players in the international grain market. But price longterm impacts from war on the energy market were caused in part by lasting disruptions to production, such as the creation of OPEC. War makes it more difficult, but not impossible for farmers to do their job. Some impact on output is likely, due to all the troubles Ukraine has already been through. But weather, not bullets likely will still be the determining factor in how much wheat comes out of the Black Sea in the coming year.
Download the complete Weekly Wheat Review report using the link below.
Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.
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