Market Thoughts
There’s a new sheriff in town. That’s right, there ain’t nobody above protectionism. The global situation has caused many countries to a risk off approach, which means global trade will suffer as countries around the world implement export bans and trade sanctions against various other countries. Agricultural trade is especially vulnerable during these times.
A google search of the term “wheat export ban” gives results of no less than 10 countries who have “banned” wheat exports in the last few weeks. Of course, the Ukraine conflict is a major contributor, yet the facts would suggest that these bans have been in the works for some time now
Why This Matters
For Canadian grain farmers this a bullish signal for grain. When countries are banning exports they are concerned about their own stocks. In other words, the politicians don’t want to risk their necks if a bread riot break out. These countries will most likely aggressively import as much product as they can in order to prevent societal unrest.
Initially this is excellent for exporting nations like Canada as demand is strengthened and remains strong at least until the threat is over, which will keep prices strong. However, these high prices will increase production and eventually prices will start to drop off.
In the short and medium term expect very strong prices and unless there is a massive crop.
Bulls and Bears
Obviously, the political situation is bullish. Let us take a look at a good old drought map. The official US crop condition report doesn’t start until April 4. A quick glance will show that most of the wheat producing areas are in a moisture deficit.
Quick Chart
20 year …
Wheat has yet to reach the 2008 highs. There is major support around this $10 and the next major high should be around 14
