Huge rise in grain market speculation

The impact of speculation in the commodity markets on cereal prices was spelled out by grain trader Glenn Mason when he spoke to farmers at Halesworth, Suffolk.

An estimated $431 billion was currently invested in commodity funds, Mr Mason, head of committed grain marketing for Openfield, told the meeting organised by chartered accountants Lovewell Blake and Suffolk Coastal NFU branch.

This level of investment was up by more than 60 per cent compared with the first spike in the grain market four years ago – but the future pattern was unclear in a period when the market had become more challenging and volatile than at anytime in his 35 years in the trade.

The market had become victim to global macro-economics with fund managers often reacting to headlines from individual countries.

The US maize crop was the key driver of global markets — representing 40 per cent of world production and with almost one third of this going into ethanol production. The level of wheat stocks was not an issue with three of the biggest crops in the past three years.

Yet, said Mr Mason, consumption of wheat was growing particularly in China and other Asian countries adopting a more Western diet — and there was no room for any complacency.

His advice was to spread the risk in grain marketing by putting a proportion of the crop into pools, sell some forward and keep some back to take advantage of any spike in prices.