Despite the War, Another Wheat Price Spike Is Unlikely

When the third biggest wheat-producing country, Russia, suddenly decides to invade the eighth biggest, Ukraine, the price of the commodity understandably spikes. And while Russia’s production has remained mostly in line with pre-invasion levels, Ukraine’s exports have declined significantly. The market, being a forward-looking creature, sent prices skyrocketing in February-March, 2022.

Fortunately, thanks to globalization and trade cooperation, food shortages have been less severe than feared. As a result, wheat prices have been trending down for almost a year now, down almost 50% from the 2022 peak. With the war in Ukraine still raging, should another big wheat price spike be expected? The Elliott Wave chart below can help us find the answer.

Wheat prices down almost 50% from the 2022 peak

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How is the war going to unfold is anyone’s guess right now, but wheat seems to have drawn a very clear pattern already. The decline from $13.45 looks like a textbook five-wave impulse, labeled 1-2-3-4-5. In observance of the guideline of alternation, wave 2 is a simple a-b-c zigzag, while wave 4 is an expanding flat correction. The five sub-waves of 3 and 5 are also visible.

Price of Wheat On Its Bumpy Way Back to Normal

According to the theory, a three-wave correction in the opposite direction follows every impulse. This means, that if this count is correct, we can expect a notable recovery in the price of wheat as soon as wave 5 is over. Corrections usually retrace the entire fifth wave, putting upside targets between $9 and $10 within the bulls’ reach.

Once there, however, the 5-3 Elliott Wave cycle would be complete. At that point, it would be time for the downtrend to resume again and drag wheat towards $5 again. In other words, we can anticipate another notable surge, but fortunately nothing like the 2022 spike. In the long term, things should slowly return back to normal. We only hope that this normalization will be accompanied by peace in Ukraine.

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