Thursday grain market update: fund activity sends grain prices higher

As Andy Doyle reports this week, while supply remains the main driver of sentiment in grain markets, we are now in a definite weather market.

Concerns around weather conditions in a number of important growing regions are helping to lift grain futures markets this week. Flooding in Argentina, dryness concerns around the safrinha (second) corn crop in Brazil, along with heightened potential for a La Niña weather pattern have all combined to send prices for cereals and oilseeds higher this week.

However, institutional investors in grain markets are more than adding to the price rally as hedge funds pile in to agricultural commodities, increasing demand and helping to boost prices.

Europe

On the Euronext exchange (MATIF), there were gains in price across the boards for wheat, maize and rapeseed during Wednesday’s trade in Paris.

Wheat prices from Paris extended this week’s gains with May 2016 delivered wheat increasing by €3/t to finish at €155/t, while May 2017 delivered wheat also lifted by €3/t to settle at just below €179/t.

European maize prices continued recent momentum to finish at its strongest level since the end of January. June 2016 delivered maize jumped almost €4/t to finish at just over €163/t, while June 2017 delivered maize gained almost €5/t to end Wednesday’s trade at €174/t.

Rapeseed futures from Paris also continued to find support with May 2016 delivered rapeseed increasing by €3/t to finish above €379/t, while May 2017 rapeseed was up almost €2/t to settle just under €372/t.

Chicago

In Chicago, the strong rally in cereal prices continues as hedge fund buying activity lends support to prices. The recent surge in US soybean futures is spilling over into grain markets and the upward trend has momentum.

Chicago wheat continued to make strong gains on Wednesday to hit its highest level since November. May 2016 delivered SRW wheat soared by almost $7/t in price to finish Wednesday’s session at $185/t (€164/t), while May 2017 delivered SRW wheat jumped by nearly $6/t to settle below $206/t (€182/t). Chicago wheat futures have now jumped more than $20/t in the last fortnight.

Chicago corn futures also made further gains this week. Two weeks ago, prices hit their lowest ebb this year after it was revealed that US growers intended to plant 94m acres in corn this year – the third highest planted area since World War II. But, since then, corn futures have recovered those losses and more on the back of weather concerns in South America, particularly Brazil.

May 2016 delivered corn gained $4/t to settle at $155/t (€138/t), while May 2017 delivered corn increased $2/t to finish at $163/t (€144/t). This leaves Chicago corn futures at their highest point since November 2015.