Wheat near 5-years high amid supply worries

Wheat prices reached a 5-year high this week, going above the round level of $6 per bushel. Soybeans also reached two and a half year highs, exceeding $10.5 per bushel. Buyers try to assess supply risks due to dry weather in the Black Sea region, as well as in Argentina and the USA.

In the meantime, the demand for grains remains robust. Unlike the metals and energy markets, the pandemic has not had a significant impact on demand. Sale and prices for basic foodstuffs are also supported by massive consumer support packages from governments, which elevates food prices.

It is also worth mentioning that under the terms of Phase 1 of the trade deal, China must seriously increase its purchases of soybeans. Volumes are significantly behind schedule but are still generating additional demand on the market.

Prices of other agricultural commodities – corn, sugar, cotton – have been on an upward trend in recent months, but so far have not been able to overcome the collapse of the first four months of the year.

The FxPro Analyst Team