Wheat price outlook amid eased Russia-Ukraine tensions

Wheat price is considerably below the three-week high hit earlier in the week amid eased worries over the Russia-Ukraine conflicts. In the ensuing sessions, the geopolitical tensions and US dollar movements will remain at play.

Russia-Ukraine conflicts

Wheat price has been moving in tandem with the developments in Russia is the leading exporter of wheat in the world. Ukraine is also a key exporter of the agricultural commodity. Together, wheat shipments from the two countries are about one-third of the global exports. As such, tensions between Russia and Ukraine have triggered supply concerns.

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Late last week, US officials warned that Russia would attack Ukraine in coming days. As part of the evidence on the ground, Russia had surrounded Ukraine from three sides with 130,000 troops. As a reaction to the heightened tensions, wheat price surged to $8.20 per bushel on Monday; its highest level in three weeks.

Interestingly, it has since dropped by close to 5% to $7.85 per bushel as at 09:53 p.m UTC on Tuesday. The decline is a reaction to the recent glimmer of light in the Russia-Ukraine conflicts. The Russian defence ministry announced that some of its troops close to Ukraine border are returning to their bases.  Nonetheless, there is no independent confirmation of the troops’ withdrawal. As such, the US and other international powers remain cautious about the situation.

US dollar

Wheat price is also reacting to the greenback movements. As is the case with most other commodities, it has an inverse correlation to the value of the US dollar. CBOT wheat futures bounced off Tuesday’s low of $7.79 as the dollar’s demand as a safe-haven eased following the announcement by Russia’s defence ministry.

At the time of writing, the dollar index was at $96.00; having dropped from the two-week high of $96.43 hit on Monday. Even so, the losses will likely be curbed by the heightened inflationary pressures and subsequent reaction by the Federal Reserve.

Investors will be keen on the Fed meeting minutes scheduled for release on Wednesday. Based on the hawkish tone that shaped the bank’s interest rate decision in January, the minutes are expected to return investors’ focus on the aggressive rate hikes probable in coming months. With the likely rebounding of the greenback, wheat price will probably find resistance at $8.00 per bushel.