Wheat up 50% from lows as diesel threatens the harvest

Wheat up 50% and diesel threatens the next harvest

Wheat has risen almost 50% since its low at the start of the year, and the person who started the thread sees room for it to double. The trigger he points to is the relentless surge in fuel prices, which has discouraged preparation for the next harvest, due to begin in the coming weeks. From that starting point, a scenario of prices close to the 2022 highs is being discussed — the levels that coincided with the start of the conflict between Russia and Ukraine.

Why does diesel decide the price of the next harvest?

Sowing is not free. Before the grain exists, farmers must pay for diesel, seed and fertilizers — costs that come up whenever the next planting is discussed. If preparing the land costs too much, part of the acreage goes unsown and future supply tightens. That is the central argument being made: it is not that wheat is scarce today, it is that it may be scarce tomorrow.

The ghost of 2022 hovers over every calculation. That year, wheat peaked as the war in Ukraine began, and those who remember it argue that the probability of repeating that level is not small. The nuance: a high probability is not a certainty, and the price depends on decisions made in offices far removed from the fields.

Wheat futures: how to bet without receiving grain at home

The route suggested for taking a position is futures — contracts that fix a price today for future delivery and are settled without receiving the grain. The doubt is reasonable, and someone raised it with a wink: nobody is going to unload a truckload of cereal on their doorstep.

The current correction is read, in part of the analysis, as a window of entry before the seasonal surge of spring and summer. That is the seasonal reading of one participant: wheat tends to rise in spring and summer. The logic has its historical backing, though also a track record of nasty surprises for anyone who mistakes seasonality for a guarantee.

From field to shopping cart: livestock, sunflower and wildfire prevention

Rising costs hit those who buy cereal to feed livestock, not those buying to speculate. Some warn that if wheat rises, sunflower oil will double. Others go further: if livestock farms stop being viable, land abandonment will miccionan less grazing and more wildfires.

Two incompatible readings clash over that chain. One calls for shutting down farms that have no margin. The other replies that such closures would carry a collective cost nobody is willing to pay afterwards, and that people stay in the countryside out of inertia. Underneath it all, an uncomfortable question: who keeps the land going when the activity that sustains it no longer makes money.

For those who believe in seasonality, the wind is at the bulls' backs and the price floor is already far behind. Whether the script pointing to the 2022 highs plays out is another matter. Diesel rules, and diesel gives no warning.