Many of us may view investing as a necessity of life, but one of the actual necessities is the ability to procure food to feed ourselves and our families. Wheat is a staple of the human race’s diet and its importance to the global population cannot be overstated. The war that has been raging in Ukraine since late February has upended a major producer of the global wheat supply and the side effects could be catastrophic.
Recently news came out of the United Nations Security Council that the world could only have less than a ten-week supply of wheat in reserve due to the ongoing conflict. Sara Menker, the CEO of a firm called Gro Intelligence that uses public and private data along with artificial intelligence to study global food trends, made a presentation to the U.N. that outlined just how dire the situation could be. Together, Russia and Ukraine produce about one-third of the planet’s wheat supply but now that they are at war, that supply is threatened.
Black Sea ports are currently under blockade, preventing the shipping of wheat out of Ukraine to other parts of the world. Ukrainian roads and railways have been destroyed and damaged due to the Russian invasion, further hampering the ability to move wheat from farms to export markets. The ongoing fertilizer shortages and supply chain disruptions that the entire world is still dealing with due to the COVID pandemic only exacerbate the situation.
While the ten-week figure that Menker stated is alarming, the disruption to current plantings and subsequent harvests means that the world could be in for a long-term shock rather than just a short-term blip. It is possible that other areas of the world can pick up the slack that is taken out of the system from Russia and Ukraine, but that scenario poses challenges as well. Growing regions such as the United States and Brazil are currently facing drought conditions in large regions, so it appears that bringing additional grain to market will take more than one growing season.
For investors, a way to gain exposure to the commodity wheat price is the Teucrium Wheat Fund (NYSE: WEAT), which invests in benchmark wheat futures. The fund has a market cap of about $500 million and has returned over 45% year to date. The fund will most likely swing back and forth in tandem with any news about Black Sea grain ports in the near term as the world tries to determine if any grain and supplies can get in or out of Ukraine. It is unclear when the ongoing Russia and Ukraine conflict will end, however, adding WEAT to your portfolio could be a way to gain exposure to upward pressure on the commodity price. It could also provide welcome diversification since most sectors of the stock, bond, and cryptocurrency markets have been hammered downward so far this year.
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