$WEAT ETF in hopes to capture the likely rise in wheat prices across the world due to global conflicts – DD/Discussion via /r/wallstreetbets #stocks #wallstreetbets #investing


$WEAT ETF in hopes to capture the likely rise in wheat prices across the world due to global conflicts – DD/Discussion

Disclosure: This post is a mix between DD/Discussion.

Thesis: Global wheat trade is poised for trouble; thus, demand will outweigh supply and prices will increase if global tensions escalate to the tipping point. The exposure to wheat is through the $WEAT ETF. Look at how crude oil has responded to the developing crisis. Also, if you go look what at the price action of WEAT during the month following Russia’s annexing of Crimea, it shot up 20% in less than a month and that debacle now seems minor to the scale of the ongoing issue.

Content: The tensions in Eastern Europe with Russia, Ukraine, the US and NATO are recent high and growing. Russia has amassed over 100k troops along the Ukraine border and China has reportedly made preparations to potentially invade Taiwan. If Russia makes any likely moves on Ukraine NATO has stated that there will be heavy sanctions like none seen before, and I would obviously assume likewise for China. China and Russia have been growing their political ties, and China was Russia’s largest partner in trade this past year.

It turns out, Russia and China are among the top 3 in the world for producing wheat. I would imagine if tensions develop into conflict, any wheat trade on a global scale will be affected. Ukraine is also in the top 10 of wheat producing country, and surely they would be exporting less if conflict arises. US is major wheat producer and “Food, Beverages, and Feed” is one of the largest US export categories. If Russia and China stop exporting to NATO allies or NATO sympathetic nations and Ukraine is unable to export wheat during conflict then I would imagine the demand for wheat globally will rise and supply will shorten.

Russia has also recently put a ban on exporting ammonium nitrate. Two crops that need a lot of ammonium nitrate (key ingredient in fertilizer) corn and WHEAT. Fertilizers also use ammonia, and ammonia production is coupled with gas prices – which are also rising among tensions in Eastern Europe.

Some links to these points: https://www.philstar.com/business/2022/02/03/2158119/philippines-talks-china-fertilizer-imports

https://www.spglobal.com/platts/en/market-insights/latest-news/agriculture/020222-russia-bans-ammonium-nitrate-exports-until-april-to-support-domestic-farmers

China leads the world in fertilizer production. Russia in 4th and US making half of what China produces.

With the Olympics set to start, I would say nothing will likely rise to the level of an actual, physical conflict until the Olympics is over, that take is speculative but it makes sense. But that would make right now the time to look at call options for the $WEAT ETF and the furthest date out available for my brokerage app is mid-July. And OTM calls are dirt cheap.

A key issue though is that I have found little exposure to such a commodity/market that is readily available to retail investors. The only ETF I have found is $WEAT and quite frankly its ties to wheat commodity contracts in Chicago is a bit hard to follow and would love some clarification if anyone knows this logistics of it. All opinions welcome.

Submitted February 08, 2022 at 05:34AM by riskybizbaz
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