Funds’ bets grains and oilseed prices changing: Grain market daily

• UK feed wheat futures (May-25) ended yesterday at £176.70/t, up £1.30/t from Friday’s close. The Nov-25 contract gained £1.40/t over the same period, to close at £191.85/t.
• Domestic wheat futures closed higher yesterday following global grain markets. Chicago wheat futures and Paris milling wheat futures (May-25) were up 2.06% and 0.45% respectively at yesterday’s close. Weather concerns for winter wheat in the US supported prices.
• After the tariff worries, currency fluctuation could provide significant influence on the market in the current week. The US Federal Reserve's interest rate decision will take place on 19 March, and on 20 March the Bank of England will decide on interest rates. Market consensus is that domestic rates will remain unchanged at 4.5%.
• May-25 Paris rapeseed futures closed at €466.00/t yesterday, down €2.50/t from Friday’s close. Winnipeg canola futures (May-25) were up 1.6% yesterday, due to a correction after five sessions in row decreasing. NOPA data for February showed soybean crushing in the US well below analysts’ estimates.

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Due to increasing tariff concerns since the beginning of February 2024, managed money, often referred to as "the funds", have changed their positions in commodity futures and options. These changes likely both reflected the recent falls in grain and oilseed prices and contributed to falls.

In Chicago maize futures and options, from the high level of 350,000 contracts in February, the funds have significantly decreased their net-long position (US Commodity Futures Trading Commission, CFTC). As of 11 March, the funds’ net-long position on Chicago maize futures and options was 146,542 contracts.

Net-long positions can bring profits for this type of trader when future prices rise but result in losses when prices fall. Cutting the funds’ net-long position to reduce the on Chicago maize futures likely added additional impulse to prices falling.   

Since early February the funds increased their net-short positions for the main wheat futures. We especially need to pay attention for the Paris milling wheat futures due to its high influence for the UK domestic market. In Paris milling wheat futures, the funds had the largest net-short position in the seven years of published data at 206,892 contracts (7 March, Euronext). Net-short positions are often used by this type of trader to profit from falling prices.

For the UK feed wheat, the funds had a net-short position of 1,222 contracts on 11 March, also near the highest historical level in available data (ICE).

There is an interesting situation for oilseeds. Despite recently sharply decreasing them, the funds still have net-long positions in Paris rapeseed and Winnipeg canola futures.

Meanwhile in Chicago soyabean futures and options, the funds’ net-short was 15,544 contracts on 11 March. Indeed, acceleration in harvesting soyabeans in Brazil is putting pressure on the Chicago futures.

Looking ahead

Funds are net-short Chicago Wheat, Paris Milling and UK Feed Wheat futures, putting pressure on the market. From one hand, any further selling could add more pressure on the market. But, from another hand, any covering of these short positions (in response to any price rises) could accelerate any upward trend in prices.

In Chicago maize, the funds are still net-long, despite a rapid decline in recent weeks, and could pose a risk if prices fall further.

However, due to the increasing unpredictability of the global commodity market, price volatility is increasing. As a result, speculators may focus on the volatility of these instruments and reduce the gap between their long and short positions (the net position) closer to parity. 

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