CropTec Show
Farminguk
24 August 2016 | Online since 2003
Auto Trader Ltd


10 March 2014 06:10:56 |

Speculative money 'flooding' into grains sector


EU grains finished mostly higher on the day, with the exception of rapeseed, and sharply higher for the week across all commodities on Ukraine uncertainty and a sudden huge rush of speculative money flooding back into the sector.
Mar 14 London wheat ended the day GBP3.05/tonne higher at GBP164.65/tonne, and with new crop Nov 14 GBP2.50/tonne firmer at GBP155.75/tonne. Mar 14 Paris milling wheat jumped EUR7.00/tonne to EUR215.25/tonne, Jun 14 Paris corn was EUR1.25/tonne firmer at EUR184.00/tonne and May 14 Paris rapeseed fell EUR2.25/tonne to EUR411.75/tonne.
This was the highest close for a front month on London wheat since before Christmas. It was Paris wheat's best finish since the old crop May 13 contract expired last spring, and similarly Paris corn's highest front month close since the Aug 13 contract went off the board last summer. For Paris rapeseed yesterday's close was the best since last June.
It's interesting how the unforeseen Russian invasion of Crimea, which has a landmass roughly the size of Belgium, could cause such a rapid change of wind direction in the grains market.
In Chicago, fund money had been not just pulling out of wheat, but actively shorting it for well over a year until recently. It had also built up a sizeable short in corn throughout the second half of 2013.
Today's Commitment of Traders report shows fund money reducing their net short in CBOT wheat by over 14,000 lots for the week through to Tuesday night, to hold a net short of just 6,000 contracts. The same community were short more than 100,000 futures and options combined at the end of 2013. For corn, fund money has re-positioned from being short approaching 250,000 contracts last November to now long over 158,000 lots, of which a whopping more than 70,000 was added in the week through to Tuesday night alone.
Note, that these positions are based on Tuesday night, it seems likely that the funds have been further net buyers subsequently too.
Whilst I and others, didn't ever doubt for one minute that fund money had gone away forever, never to return to the grain markets, most of us didn't see it coming back quite so soon. The question now has to be how long is it going to hang around this time? Because you can be sure that something will happen left of field to entice them to fall out of love with the grains sector again, we just don't know what it will be and when it will happen. Welcome to the casino!
Fundamentally nothing that much has changed to justify London wheat now being more than fifteen quid, or 10%, higher than it was at the end of January.
Grain is still moving out of Ukraine, almost unhindered, save with the exception of shipments out of the Crimean port of Sevastopol which require "special permission" to leave (although this is not a major exporting port accounting for only 3.6% of the country's grain exports in February).
Indeed, APK Inform say that grain shipments in February were a record volume for the month at 2.3 MMT, of which 85% (nearly 2 MMT) was corn. Odessa (58%) was the main exporting port, followed by the terminals of the Nikolayev oblast (32.2%), they say.
This takes Jul/Feb grain exports to 24 MMT, versus an APK Inform estimate for full season shipments of 31.7 MMT.
If we ignore the argument that the dispute will harm exports, the other main area of concern is how might it affect production prospects in 2014. Informa Economics this week forecast a Ukraine wheat crop of 20.5 MMT, versus 22.3 MMT last year, with Russia's output declining from 52.1 MMT to 49.5 MMT. Both seemingly on reduced winter plantings, the result of the wet autumn in the region. Kazakhstan's wheat crop however will rise from 13.9 MMT to 16.3 MMT. The net end product being 88.3 MMT of wheat coming out of the three main FSU producing nations later this year, which is only 2 MMT less than last year.
That's hardly a cataclysmic disaster, but when the fund elephants are stampeding around the room it's maybe best to stand to the side and let them get on with it. Note carefully though, that not one ounce of actually real end-user demand is created by fund buying. There are already rumblings of discontent across the Atlantic that the difference between these new sharply higher wheat, corn and soybean futures prices aren't being fully reflected in the cash market.

Download

0 Comment

loginuserlogo
Name

Please enter your name


Email

Please enter your email

Please enter valid email


Comment

Please enter your comment


Post Comment

Your comment has been submitted successfully. Please wait for admin approval.


Comments

No comments posted yet. Be the first to post a comment


Canada | 23 August 2016
Drones are taking Ontario agriculture to new heights

Dr. Mary Ruth McDonald from the Ontario Agricultural College at the University of Guelph, said drones have become an important tool in a farmer’s toolbox in the last decade. "Even before that, peop...


Belgium | 23 August 2016
European study reveals dairy farm dust is stopping farm kids developing asthma

A Belgian study of European children growing up on dairy farms has revealed exposure to farm dust from an early age can prevent asthma. Researchers have tested the theory on mice, and found exposur...


Ireland | 23 August 2016
Tradition trumps technology at the marts

The traditional livestock trade continues to trump online selling. Despite the surge in digital buying across almost every industry, evidence suggests that farmers remain "on the fence" about the phen...


China | 23 August 2016
Shipping dairy cows to China is 'ecomomic treason', Winston Peters says

Dairy giant Fonterra has been accused of "economic treason" after shipping thousands of dairy cows from Timaru to China. However, the company says it is important to be realistic about the scale of...


USA | 23 August 2016
Flooding will cost state agriculture $110 million

Heavy rains that recently caused historic flooding in south Louisiana will cost the state’s agriculture industry at least $110 million, according to preliminary estimates from the LSU AgCenter. Tha...



Trending Now

Viewed
Discussed


Top stories you may have missed
FarmingUK
FarmingUK Logo

FarmingUK

The sustained recovery of pig prices since the spring has come at a time wh...


FarmingUK
FarmingUK Logo

FarmingUK

A World Trade Organisation (WTO) panel has declared the Russian import ban ...


FarmingUK
FarmingUK Logo

FarmingUK

A new study has linked oilseed rape crops grown from neonicotinoid-treated ...


FarmingUK
FarmingUK Logo

FarmingUK

Philip Hammond is to guarantee billions of pounds of UK government investme...


FarmingUK
FarmingUK Logo

FarmingUK

Access to the foreign labour market is 'critical', according the chief exec...


FarmingUK
FarmingUK Logo

FarmingUK

The Tenant Farmers Association has said the National Trust's vision for a p...


FarmingUK
FarmingUK Logo

FarmingUK

Ulster farmers will 'not lie down and wave the white flag' when Brexit nego...


FarmingUK
FarmingUK Logo

FarmingUK

The cost of rural crime to the UK economy costs £42.5 million a year, accor...


FarmingUK
FarmingUK Logo

FarmingUK

A young farmers club member from Oxfordshire has created a petition on the ...


FarmingUK
FarmingUK Logo

FarmingUK

The farming sector has reacted negatively to a proposal to reintroduce the ...


closeicon
Username
Password