Grain Gains: Ukraine Crisis Has Corn Popping!
You gotta love it…
It wasn’t that long ago everybody hated grains.
Analysts were unapologetically bearish on corn and wheat in late January. Predictions of another huge crop year had them tossing around price projections of sub-$4 a bushel corn and wheat in the low $5 range.
But fast-forward a month and bears are quickly changing their tune…
As you’re likely aware, the Ukrainian crisis is only getting more complex by the day. I won’t waste your time by sorting through all the sordid details here.
All you really need to know is the situation is putting a big bid underneath the once hated grain complex. Since last Thursday, corn has jumped a whopping 8%, while wheat has surged just over 9%.
Take a look…
The same commodities that nearly every analyst under the sun was recommending be sold a few weeks ago, are now surging to multi-month highs. As a matter of fact, at $4.97 a bushel, corn is jumping to levels last seen in August 2013. Wheat is surging to $6.60 a bushel- the highest price since November.
What’s behind these abundantly bullish moves?
Ukraine is one of the world’s largest grain exporters. In fact, before the turmoil began, the country was expected to be the world’s fifth-largest wheat exporter and third-largest corn shipper.
But now, investors are suddenly (and rightly) worried the highly uncertain political situation will slow grain exports through Ukrainian ports on the Black Sea.
And that’s not all…
There’s also a growing worry of global powers imposing economic sanctions on Russia. If such a scenario comes to fruition, it would likely disrupt grain exports out of that country as well.
In a worst-case scenario, a substantial portion of global grain supply could come off the market. And that has investor sentiment abruptly switching from complacency to fear.
How can you capitalize on further gains in corn and wheat?
The iPath DJ- UBS Grains Total Return ETN (JJG) tracks corn, wheat, and soybean prices. The commodity-based ETN will undoubtedly rise if Ukrainian turmoil pushes grain prices higher.
But be aware…
As is usually the case with fear-based price reactions, an unexpected resolution to the Ukraine crises could pull the rug out from underneath the grain markets. As a result, use caution when entering JJG on the long side.
Until Next Time,
Justin Bennett
***Editor’s Note*** Subscribers to my flagship investing service, the Commodity ETF Alert, knew grains were too cheap over the past few months. In fact, they were buying an assortment of grain-based ETFs when corn, wheat, and soybeans were at their lows. Now that these assets are on the run, all they have to do is sit back and watch the profits roll in.
