How to Trade Putin’s Evil War – Part 3 (NYSEARCA:WEAT)
Vladimir Putin has threatened to walk away from an agreement reached earlier this year that allowed the resumption of exports of agricultural products from Ukraine’s Black Sea ports. He called the case a scam. “It may be useful to think about how to limit (food exports) in this sense,” Putin said.
“UN data shows that out of 87 shipments, 57 went to non-European countries, including China, Egypt, India, Iran, Lebanon and Turkey. FT reported. Basically, Putin is lying.
“Turkish President Recep Tayyip Erdoğan has echoed Vladimir Putin’s criticism of a grain deal he helped broker between Moscow and Kyiv, as he pledged to discuss the issue with the leader Russian at an upcoming summit.” was the news on FT.
Ukrainian forces appear to be advancing, pushing Russian troops out of their territory. Russia called two days ago for a meeting of the UN Security Council to stop arms exports to Ukraine. A strange act of an attacker.
We could see actions from Russia against the EU. Stopping cereal exports would cause food crises in poor countries, which would result in an exodus of migrants to the EU. This could destabilize the political situation in the EU. My baseline scenario is that Russia will stop Ukrainian marine grain exports. We purchased the Teucrium Wheat Fund (WHEAT). The ETF is down 50% since the export restart. This indicates the positive side.
WEAT tracks a wheat futures index. It tracks wheat performance by holding Chicago Board of Trade wheat futures contracts with three different expiration dates.
WEAT avoids the first-month contract in its aim to provide exposure to wheat futures. Instead, he holds the 2nd until expiration, 3rd until expiration, and subsequent December contracts to mitigate the impact of contango, weighting contracts by 35%, 30%, and 35 %, respectively. This approach should have some success in mitigating contango, but can sometimes lag from month to month. The structure of the fund means a K-1 at tax time and a blended tax rate.
Other Ideas on How to Negotiate Putin’s War on Ukraine
We remain long LNG carriers via COOL and GLNG. They are the beneficiaries of Russian gas blackmail. We are up 50% on positions in a few months and believe in much more upside.
We remain long product tankers through HAFNIA. We are increasing our position today in the block trade and also bought more on today’s weakness. Russia is the main diesel producer for Europe. Diesel will stop flowing from Russia in December. Product carriers should benefit. Brokers are increasing their price targets for Hafnia and other tankers almost every week.
We are long in Norwegian gas production through Var Energi. The Var is the first choice of several Scandinavian brokers because gas represents more than 30% of their hydrocarbon production.
We also bought palladium producer Sibanye (SBSW). Russia is a major producer of palladium. Russia is the largest producer of palladium in the world with a market share of 25-30%. Palladium could be next on the list of Russian sanctions against the West. SBSW is down 50% since the start of the war. The market was sold as palladium was included in war sanctions. SBSW has been stable for weeks at current levels. The other side of the coin is limited, if the palladium is dragged into the war, the share price should double.