The Graincorp Ltd (ASX: GNC) share price took flight on Monday. Investors bidded up the grain exporter's shares today despite there being no announcements from the company.
At the close, the Graincorp share price finished at $8.40, up 5% from its previous close. However, shares in the company had been as high as $8.62 throughout the day.
Let's take a look at what could be behind the momentum.
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Wheat shortage presents opportunity for Graincorp share price
As the devastating Russian invasion of Ukraine continues, analysts are looking at how the conflict could impact markets. According to several experts, one expected side effect of this catastrophe is a considerable jump in wheat prices.
Already, global prices of the staple food have surged 20% since the beginning of the year. However, experts such as James Maxwell, senior insights manager at Rural Bank, are anticipating sky-high wheat prices if the turmoil continues in Ukraine.
Between Russia and Ukraine, 30% of global wheat exports could be disrupted. Due to the dangerous environment and sanctions imposed, Middle Eastern and North African markets could turn to Australia.
Maxwell stated:
We'd expect 50% increases or even more [if the conflict continued to July], which is saying something because we're already pretty close to record prices.
Earlier this month, the Graincorp share price rallied after the company upgraded its full-year guidance for FY22. At that point in time, the company was already pointing at the high global demand for Australian grain.
Prior to Russia's invasion of Ukraine, the last time access to wheat exports via the Black Sea was lost was during World War I. To drive home the significance of these circumstances, Rabobank agriculture analyst Dennis Voznesenski said:
Chicago wholesale wheat prices rose 45% from October 1914 to February 1915.
The Graincorp share price is now trading on a price-to-earnings (P/E) ratio of ~13 times.
