The value of wheat has fallen considerably over the past month. A bumper crop in Australia, forecasts for strong South American maize production, and the continuation of exports from Ukraine have all contributed to the slide in prices.
Furthermore, data from the Commodity Futures Trading Commission (CFTC), who monitor the position of traders in futures market, highlights that ‘managed money’ funds have consistently been net-sellers of Chicago wheat futures since the beginning of October. Fundamentally, this means that those in charge of investment funds expect wheat prices to go lower. The net position of such funds shows that investment funds are now the most bearish they have been since April 2019.
This bearish view for comes despite the global supply and demand balance for wheat being the tightest since 2007/08 and is a potential indicator of recessionary concerns.
The maize picture, which is an underlying driver of wheat markets, has been more positive with prices rising in recent days. Much still hangs on the South American maize crop. There are concerns for Argentinian production amid drought, whilst the Brazilian crop outlook is still positive. The Brazilian crop is typically more than twice the size of the Argentinian one.
May 2023 UK feed wheat futures have tracked the global wheat price decline, falling to around £240 per tonne, a drop of around £20 per tonne from mid-November. New crop, November 2023, futures have dropped by a similar amount, to just under £228 per tonne, on 15th December.
While the mood is generally negative around grain markets, there are still some potential positive drivers. In particular, there is much discussion at present about the decline in India’s wheat stocks. India consumes 13% of the world’s wheat, and stocks are expected to hit a six-year low.