Another Dust Bowl Drought Disaster?

| May 14, 2014 | 0 Comments

wheatThe United States Department of Agriculture (USDA) revealed some rather shocking data last week.

According to the government agency, US drought conditions are getting dramatically worse. In fact, the situation is so bad in Oklahoma and North Texas that officials are comparing it to the Dust Bowl era of the 1930s.

As you may know, the Dust Bowl was a multi-year period where extreme drought ravaged the US plains. Thousands of family farms were abandoned as crops withered and topsoil blew away- all due to a severe shortage of rain.

Speaking of a critical rainfall shortage, take a look at this…


This map from the National Drought Mitigation Center confirms just how bad the situation really is. As you can see, Oklahoma, Texas, and California are engulfed in “exceptional” drought conditions.

The dryness poses a serious problem for winter wheat…

As a matter of fact, the USDA revealed the percentage of US winter wheat crop in “good” or “excellent” conditions fell to 31% last week. At the same time, wheat in the “poor/very poor” category jumped to 39% from 34%.

What’s more, recent USDA analysis of the Kansas winter wheat crop revealed the state would likely produce its smallest crop since 1996. In case you’re unaware, Kansas is the top wheat producer in the US.

And listen to this…

The USDA released their World Agriculture Supply Demand Estimates (WASDE) report last Friday. Government analysts see this year’s wheat crop coming in at an eight year low of 1.96 billion bushels. Since hard red winter wheat accounts for most of US wheat production, this year’s total US harvest will be undoubtedly weak.

What’s all this information mean for prices?

As you may know, wheat has been in a strong uptrend since late January.

See for yourself…


With wheat trading at the highest price since early 2013, investors are clearly concerned about the US drought situation. If rains continue to avoid the southern plains, I wouldn’t be surprised to see this commodity keep its bullish tone for the rest of the summer.

Of course, the ongoing political crisis in Ukraine is adding fuel to the fire…

Remember, Ukraine is one of the top wheat exporting countries in the world. If the current political firestorm pushes the country into civil war, grain exports from the region could plummet. This situation is definitely keeping grain investors on their toes.

As you can see, there’s plenty of information supporting the bullish side of the wheat market.

How do you capitalize on the situation?

The Teucrium Wheat Fund (WEAT) is the only pure commodity ETF play on the wheat market.   When the price of wheat rises, so does WEAT. And the best part is, there’s no need for a complicated and potentially risky futures account!

Until Next Time,

Justin Bennett

Tags: , , , , , ,

Category: Grains, Wheat

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.