Speculative trading risk for grain prices: Grain market daily

• May-22 UK feed wheat futures dipped yesterday, down £0.55/t to £227.25/t. The Nov-22 contract also fell £0.55/t to £201.05/t.
• Paris rapeseed futures (May-22) lost €2.75/t to €662.00/t, approx. £564.00/t. Nov-22 prices fell €8.00/t to €543.00/t, approx. £462.50/t.
• These dips partly followed a fall in Chicago maize and soyabean futures. There was selling by speculative traders and rain is forecast for southern Brazil in the coming days. This area, along with northern Argentina, are big maize and soyabean growing areas but have been drier than normal in recent weeks.
• Trade association Coceral forecasts 2022 rapeseed production in the EU-27 and UK at 20.0Mt, up from 18.5Mt this year, due to larger planted areas. Coceral also project the wheat crop (exc. Durum) to fall 3.4Mt to 139.8Mt assuming yields return to average in the Balkan states.

Speculative traders remain heavily bought into the Chicago maize futures market. This could pose a risk to maize, and so wider grain, prices in the weeks ahead if South American weather is favourable.

‘Managed money’ held more long positions in Chicago maize futures than short positions as of 7 December. The overall, or net, long equated to 22% of all open contracts (the open interest). This is the second largest net long since December 2012 (behind 23 November 2021). It points to bullish expectations, reflecting the tightness in global maize supplies.

New crop (Dec-22) maize futures prices dropped back in the past week. Yet, information from Refinitiv points to them still holding sizeable long positions.

Favourable rains in southern Brazil were part of the reason for new crop prices dipping recently. More positive weather in South America could lead to further pressure on maize prices. In turn, this could trigger speculative traders to sell off some of their long positions. A speculative sell-off could accelerate any price fall. A fall in maize prices can then lead to a fall in UK feed wheat prices.

Yet, the current rain in southern Brazil is much needed. But, whether it’s enough and will continue into the key growth period for the Safrinha crop, due to be planted in February/March, remains to be seen.

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