War in Ukraine drives up prices for agricultural commodities such as wheat and rapeseed – this is how investors can benefit

• Agricultural commodities with price rally
• Ukraine is largely absent as an export country due to the war
• Investors can trade price developments on the agricultural market

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Wheat price increased significantly

The wheat price has increased significantly in recent weeks. Already at the beginning of the year, when tensions between Russia and Ukraine had intensified, the price for grain on the agricultural markets experienced a surge, which was further intensified by the Russian war of aggression in the neighboring country since February. Both countries are responsible for more than a quarter of global wheat exports – the war has disrupted export supplies and caused prices to explode, which consumers are also feeling in supermarkets.

But not only buyers of bread, pasta and other grain products have to continue to dig deeper into their pockets, the price premium also made itself felt on the grain exchanges: In the last three months, the price of wheat has risen by around a third. On the Chicago futures exchange, it peaked at 1,364 US cents per bushel, on Euronext investors paid more than 420 euros per ton at the top.

India apparently wants to use the excess demand to increase its own market share in the wheat market. According to insiders, steps will be taken in the coming weeks to make the country one of the top exporters of higher quality wheat, two government officials told Reuters. India is the world’s largest wheat exporter after China and apparently wants to further expand this position.

Rapeseed price with new record

The price of rapeseed has also reached dizzying heights in the slipstream of recent geopolitical events. With a record price of around 905 euros per ton, rapeseed was more expensive than ever before in mid-March. Before the outbreak of the war, a ton of rapeseed was still being traded for around 700 euros.

A feared supply failure is also to blame here, because the Ukraine is the most important rapeseed supplier in the European Union. Information from the Union for the Promotion of Oil and Protein Plants e. V. (UFOP), according to a lack of deliveries from the Black Sea region could significantly affect the scarce global availability of rapeseed. It is feared that the supply situation will not change in the fall if the field work in the Ukraine cannot be carried out in the spring or can only be carried out in part.

Experts also attribute the fact that the price of rapeseed has risen so enormously as a result of the war to the possible loss of deliveries of sunflower oil. In this segment, Ukraine is by far the leader as an export country for the EU. The war in the country will probably not only significantly reduce this year’s harvest, but also the new sowing for the coming year is seriously endangered. Against this background, consumers are looking for vegetable oil alternatives and are increasingly turning to rapeseed oil.

opportunities for investors

The massive rise in prices for agricultural commodities as a result of the war, but in particular the dwindling hope of a speedy return to old price levels, offer investors in the stock market environment opportunities.

commodity stocks

On the one hand, there are commodity stocks that could benefit more from the high prices. Representatives such as Bunge and BayWa should be mentioned here. Bunge is one of the largest suppliers to the food and feed industry, where wheat is in high demand. In addition, Bunge describes itself as the world’s largest bottler of edible vegetable oils. Bunge stock is up 5.65 percent over the past month.

The Bavarian agricultural and trading group BayWa is the largest German agricultural trader and as such is also feeling the effects of the high prices for agricultural commodities. However, the company has successfully realigned itself and has focused, among other things, on the renewable energy business. The BayWa share has gained around 11.5 percent over the last month.

Fertilizer makers CF Industries and Mosaic, which are up 30 percent and about 38 percent for the month, respectively, could also be worth a look for investors in this segment.

If you want to diversify, you can also use agricultural funds, i.e. funds that invest in different stocks in the sector.

Commodity ETCs

Agricultural ETCs are also a way for investors to benefit from current developments on the agricultural exchanges. With these perpetual, secured bonds, which are linked to the performance of commodities, investors can invest in certain agricultural products such as wheat, but also corn and canola. In this way, you participate in the price development on the agricultural market.

However, investors must be aware of the risks here, because investing in an agricultural ETC does not result in diversification. Futures or futures contracts, which do not always match the spot price, are also used as the basis for price determination.

Commodity CFDs and Certificates

Commodity certificates are also ideal for trading wheat & co. These enable investors to participate in commodity futures transactions, with investors betting on either falling or rising commodity prices in the future.

Agricultural CFDs are now ideal for very experienced and risk-averse investors. With these contracts for difference, investors can trade with leverage, which makes high profits possible with high risk at the same time. In principle, CFDs are more suitable as a short-term, speculative investment; if you want to trade medium- or long-term price developments, you should rather rely on ETCs, share investments and funds or certificates.

Editorial office finanzen.net

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