International futures markets were a sea of red last night, nearby Chicago corn and wheat pushing into double digit losses. The weaker AUD will help counter a good slice of the negativity today, but it will have its work cut out for it to cover the move lower in most futures and most cash markets. The only green on the screen this morning is in Paris rapeseed and palm oil. Nearby May 25 Paris rapeseed was up €6.50 / tonne, the Feb 26 slot was up €3.50 / tonne.

Funds or investments firms often see grain futures as a way to hedge against inflation. Buy futures, as the cost of living increases so does the value of commodities. Many analyst were talking about this type of inflation hedge earlier in the year, as US grain futures began to rise.
These same analyst are now stating the inflow of money and hence the recent rise in grain futures was more reflective of the funds buying grain as an inflation hedge than buying on the back of possible production issues. The hard freeze in the US and talk of dry weather in Russia and Argentina are now being thrown up as catalysts to establish a fundamental reason behind this buying. Hence without further inflation fears, or confirmation of major production issues, we are seeing some of this money being drawn back out of commodity futures. This is one explanation for this weeks decline in US futures.
It’s not new to assume that US grain futures movement often has little to do with the cash or fundamental market. This becomes even easier to believe when these moves happen during the middle of the northern hemisphere winter. I still find it hard to believe that a cold snap that brought snow to northern Florida will not have an impact on US winter wheat though, especially those fields that had minimal or no snow cover. This is a waiting game now.

It can’t be understated what the impact of outside markets is having on grain futures. Things live Nvidia shares falling 6% after the earnings announcement yesterday. That’s a loss of US$1Bn for the afternoon. Suggested port fee charges on Chinese made ships docking in US ports. Crazy world.