Wheat price rebounds amid skepticism over Russia’s claims

Wheat price is hovering around the crucial zone of $10.00 per bushel after dropping below it in the previous session. Investors are keen on the progress of the Russia-Ukraine talks.

Fundamentals

Wheat price has bounced back above the critical level of $10 per bushel after dropping below it in Tuesday’s session. Indeed, the commodity’s futures at the Chicago Board of Trade (CBOT) have been on a decline since the beginning of the week as investors eye the Russia-Ukraine talks. On Monday, the bulls lacked enough momentum to break the resistance at $11.00; yielding a drop to an intraday low of $9.73 on Tuesday.

Are you looking for fast-news, hot-tips and market analysis?

Sign-up for the Invezz newsletter, today.

This was the first time in March that wheat price fell below $10. Notably, the 8% drop pushed the CBOT futures to the allowed daily limit. It has since rebounded to $10.13 as at 09:30 a.m GMT.

The easing in wheat price is a market reaction to the recent announcement that Russia will reduce its military presence near Kyiv and Chernihiv in Ukraine. The move has raised optimism that the face-to-face talks between Ukraine and Russia delegates may yield the desired outcome.

Even so, Ukraine and the US are sceptical about Russia’s promise to scale back. President Biden has indicated that he won’t read anything into Russia’s assertions. He further stated that the imposed sanctions and military aid availed to Ukraine will continue.

The ongoing war has disrupted the global grain markets; boosting wheat price to a fresh record-high of $13.63 earlier in the month. While the positive news on Russia-Ukraine talks have heightened hopes over the easing of global food inflation, it is no quick fix to the supply disruptions.

Indeed, wheat price remains at a historic high. Prior to 2^nd March when the US futures rose above $10 per bushel, it has been trading below $9.00 since November 2012. To revive the Black Sea exports, the West will need to lift the sanctions imposed on Russia. This also includes restoration of shipments from eastern Europe.

From this perspective, $10 will remain a crucial level in the ensuing sessions. With further positive news regarding the Russia-Ukraine crisis, it may pull back slightly below this level while holding steady above the resistance-turn-support zone of $9.00.