Market Fluctuations: Wheat and Brent Futures See Volatility Amid Weather, Supply Concerns, and Geopolitical Tensions

 Market Fluctuations: Wheat and Brent Futures See Volatility Amid Weather, Supply Concerns, and Geopolitical Tensions

Both Brent crude and wheat futures have seen higher volatility in the past two weeks, influenced by a combination of export demand, supply concerns, currency flows, and geopolitical risk.

Wheat Futures

in the past two weeks, wheat futures experienced a sharp jump, with May contracts rising 2.1% to $5.68½ per bushel at the CBOT. This was largely fueled by the narrowing global wheat supplies due to poor weather in major production areas, such as the U.S. Central Plains, the Black Sea, and Eastern China.

But on March 20, wheat futures fell, closing at $5.57¼ per bushel. The cause of the decline was weak weekly export sales figures and a more appreciated U.S. dollar that made U.S. wheat less competitive in the global market. 

Up to March 28, wheat futures continued to fall, with May contracts at $5.21½ a bushel. Continued weakness was due to predictions of beneficial rainfall in the U.S. hard red winter wheat region, which would eliminate previous supply concerns, combined with poor export demand.

Brent Crude Futures

Brent futures have hovered near one-month highs, posting a third consecutive week of gains. This is largely on account of a tightening supply scenario, prompted by U.S. sanctions against nations purchasing Venezuelan oil and Iranian oil trade embargoes. These have constricted traditional flows of trade, Venezuelan oil sales to China, and have prompted India's Reliance Industries to halt imports. 

 Besides, Goldman Sachs reduced its Brent crude price forecast, attributing tariff risk escalation and spare capacity over-supply. The bank reduced its price range by $5 a barrel to $65–$80, spurred by concern about potential demand weakness and geopolitical tensions. 

The past fortnight has seen the volatility inherent in commodity markets, with wheat futures being influenced by weather-related supply concerns and export demand fluctuations, and Brent crude futures being influenced by geopolitical intervention and supply constrictions. Market participants will need to be on their guard as these forces play out further, and the prices could witness further realignments in the next fortnight.