A Market Mystery: The ‘Wheat Whale’ That Came Out of Nowhere – The New York Times

But professional traders who speculate on the direction of wheat prices using so-called futures contracts, and businesses that use those contracts to lock in prices for the grain, couldn’t figure out why the price of one of the most popular contracts had shot up so suddenly that it prevented them from trading.

For five days beginning on March 1, the Chicago wheat futures contract for May — the nearest month that could be used to bet on the future price of wheat without the risk of having to accept a shipment of the grain — was at “limit up,” meaning that its price could go no higher for the day.

Since most retail investors don’t trade commodities directly because they are more complicated and expensive, E.T.F.s like Teucrium are an easy way for them to make bets on the direction of commodity prices.

“There is a wheat whale, and it is the retail investor,” said Boyd Brooks, a partner at Consus, an agriculture advisory firm.

That day, the fund took in $183 million; it had never before taken in more than $35 million in a single day.

The huge demand caused problems. Exchange-traded funds are required to register their shares with the Securities and Exchange Commission, and to seek permission from the agency to issue new shares when demand exceeds supply.

Jake Hanley, a managing director and senior portfolio strategist at Teucrium, said it was “unlikely” that the E.T.F.’s hunger for wheat futures — or trades by any other single entity, for that matter — caused the Chicago contracts to lock up.

Europe gets nearly 40 percent of its natural gas from Russia, and it is likely to be walloped with higher heating bills.

Russia is the world’s largest supplier of wheat; together, it and Ukraine account for nearly a quarter of total global exports.

The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets.

Global wheat markets experienced a lot of volatility after Russia invaded Ukraine because of worries about the supply of wheat, said Dana Schmidt, a spokeswoman for the Chicago Mercantile Exchange, where the contracts are traded.

Amateur investors, many of whom embraced trading during the pandemic, have emerged as a force in the markets.

On March 7, a Reddit user with the handle “quarantrader” suggested that the E.T.F.’s price, which that day would reach its peak, could go much higher.

caused the Chicago contracts to lock up, there’s no doubt that the E.T.F.’s popularity has soared.

What’s more, the initial spike in prices has led the United States and other governments to begin planning for how to accommodate what is likely to be a sharp drop in the supply of wheat coming from Ukraine this year.

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