Wheat futures are rising amid signs of instability in the ceasefire agreement between the US and Iran. Disagreements between the U.S. and Iran over Israeli attacks on Lebanon jeopardize the agreement and could lead to supply chain disruptions and higher prices. Interestingly, the rise in wheat prices is outpacing corn and soybeans due to greater sensitivity to supply risks, as well as the drought in the U.S. Great Plains and deteriorating crop conditions. About it writes Bloomberg.
Wheat futures are growing amid heightened tensions around the truce in the Middle East, as any escalation may entail new supply disruptions and further appreciation of key agricultural resources.
The problem of access to agricultural inputs remains topical
Disputes between the U.S. and Iran over whether Israeli strikes on Lebanon undermine the terms of the agreement have cast doubt on its implementation just 24 hours after it came into force. Despite some buying on the decline, the conflict over the truce is “an escalation of war any way you look at it,” according to Joe Davis, director of commodity markets at brokerage Futures International.
And wheat is a crop with a high need for nitrogen fertilizer, so is particularly sensitive to supply disruptions across the Strait of Hormuz, one of the world’s key routes for transporting fertilizer.
“Wheat is no longer susceptible to bullish factors due to the Great Plains drought and deteriorating crop conditions reported on Monday,” he said, citing a report from the USDA’s U.S. Farm Service Agency.
That’s why wheat is outperforming corn and soybeans amid rising risks after lows recorded during the truce.
