Posted on January, 19, 2024 at 08:00 am
Speculative traders still hold large net-short positions in Chicago wheat and maize futures, which can be seen as predicting a bearish outlook for wheat and maize prices. While the latest official data is for positions held on 9 January, anecdotal information suggests that investment funds have been net-sellers since then (LSEG).
This reflects that, despite uncertainty over the Brazilian maize crop size, currently the global grain supply and demand forecasts show a surplus for 2023/24. Plus, the forecasts for US maize end of season stocks have increased. As a result, the net-short, the speculative traders hold in Chicago maize on 9 January was larger than in mid-November.
In Chicago wheat, the net-short was smaller than it was in November. The US wheat export pace remains sluggish this season, keeping pressure on prices. But the USDA has now confirmed that the US winter wheat area is smaller for harvest 2024 than 2023, which could mean a smaller US wheat crop in the coming season.
Speculative traders have also increased the net-short position they hold in Paris milling wheat futures. It was equivalent to -7% of open interest in late-September but had reached -17% on 12 January. This shift in position likely reflects the fall in May-24 futures over this period as EU exports remained sluggish but may also have contributed to the fall.
But in a change from the autumn, speculative traders also now hold a small net-short in Chicago soyabean futures too. In late-2023 they held a net-long position reflecting worries over dry weather in Brazil, and growing concern over the potential crop size.
Rains returned to the key growing areas before Christmas, though there’s still a wide range in forecasts for the Brazilian soyabean crop. Both the USDA and Conab cut their forecasts last week. Based on these current forecasts, the global outlook still points potentially surplus supplies in 2023/24, tying in with the shift in positions held by speculative traders.
This outlook is by no means certain, and some private forecasts have estimates far lower than Conab. But the Brazilian soyabean harvest is underway (1.7% complete by 13 Jan) so we will gain a lot more about the oilseeds outlook over the coming month.
It’s also worth noting that investment funds hold much larger net-short positions in Paris rapeseed futures, equivalent to 16% of all open positions.
If prices rise while speculative traders still hold sizeable net-shorts, they are likely to need to re-position. In turn, such re-positing could add to the speed of a price rally. However, the market is likely to need to see disruption to supplies for sustained price rises, such as further sharp cuts to the Brazilian maize and soyabean crop forecasts.
The next Conab and USDA forecasts are both due on 8 February.
Source: AHDB