Chicago wheat futures pushed lower again overnight. With volume towards the thinner side of expectations punters short soft red winter wheat futures remain in the driving seat. The continued pressure on wheat futures in the US has many analysts perplexed. With a net short position of roughly 200k, or 27.2mt it has quite a few punters asking why is the managed money side of this complex so negative. From a long-term perspective wheat prices are roughly at average to slightly below average values when taking long term inflation into account.
From a trading perspective it is not unusual to see US wheat futures build a sizeable net short in Jan / Feb / March. It last occurred to a similar level as it is today in March / April 2019. We were insulated from that by the drought. The data does indicate that these huge, short positions and associated negativity is usually short lived, not usually longer than 4 months. The expiry of the May contract in 2019 seeing a switch from net short to net long.
The fall in wheat futures isn’t restricted to the US market, Paris milling wheat futures were also lower overnight, shedding E5.50 on the nearby and E3.75 for the Dec23 slot. London feed wheat futures were also sharply lower as were EU corn futures. The red headed stepchild of the market and continuing to follow the recent down trend is rapeseed and canola. Paris rapeseed shed another E10.50 on the nearby. Taking the AUD / Euro into account this equates to a fall of AUD$14.25 in day to day converted price.
Kansas HRWW futures and Minneapolis spring wheat futures, although both lower by the close did not shed as much as the soft red winter wheat futures. Looking at cash bids out of the US Pacific Northwest confirms that white wheat is caught up in the downside too. At roughly US$285 per tonne WW out of the PNW converts back to a comparable XF LPP price of something close to $370 to $400. This does tend to indicate that local silo bids for ASW / APW wheat at sub $350 is a little cheap and ex farm SFW1 at less than $360 is also a little opportunistic for the trade.