Weather Woes and Market Bets: Fund Managers Go Long on US Wheat, Corn, and Soybeans

Wheat

Fund managers have increased their long positions on US wheat contracts

• Price Increase: Wheat futures have risen to $6.8 per bushel, the highest price since late July 2023, due to supply disruption concerns from inclement weather.
• Russian Frost Damage: Frost in Russia’s grain-growing regions have killed 1% of the sowed wheat acreage, leading to a state of emergency in three growing regions.
• Crop Losses: Approximately 900,000 hectares of wheat in Russia have been lost due to frost and lack of rain.
• Brazil Flooding Impact: Heavy flooding in May affected wheat production in the Rio Grande do Sul state of Brazil, a major wheat-producing state located in Southern Brazil.
• U.S. Wheat Improvement: U.S. winter wheat conditions have improved, with the El Niño weather pattern expected to fade by June.
• WASDE Report: The latest WASDE report forecasts a slight decline in global wheat supply by 2.2 million tons for 2024/2025, while global consumption is expected to rise by 2 million tons.

Speculators’ short bets on US corn have been decreasing steadily since mid-April

• Price Fluctuation: Corn futures reached $4.6 per bushel after dipping to $4.1 in mid-March due to spring weather conditions that caused planting delays as compared to last year.
• WASDE Report Insights: May’s WASDE report forecasts a decline in world corn production, totaling 1.22 billion metric tons compared to last year. Significant decreases are expected in the United States, Ukraine, Zambia, Argentina, Malawi, Mozambique, and Turkey.
• Regional Variances: Brazil, the EU, China, South Africa, and Mexico are expected to see larger corn crops, partly offsetting declines in other countries.
• Global Consumption: Despite production declines, global corn use is projected to rise by less than 1% to a record 1.22 billion metric tons.
• Import Forecasts: Global corn imports are expected to fall just under 1%, reflecting minor shifts in trade dynamics amidst production changes.

Fund managers bet on long positions in US soybeans due to current weather conditions

• Price Surge: Soybean futures are being traded at $12.4 per bushel, reaching a 4-month high due to expectations of lower supply.
• Brazil Flood Impact: Recent floodings in Brazil’s Rio Grande Do Sul state have affected 34% of the soybean crop, which remains unharvested.
• WASDE Production Forecast: May’s WASDE report forecasts global soybean production to rise to 687.1 million tons in 2024/2025, driven by higher production in South America, the United States, and South Africa.
• Export Growth: Global soybean exports are projected to increase by 4% compared to last year.
• Brazil’s Output: Soybean production in Brazil is expected to reach 169 million tons in 2024/2025, up from 154 million in 2023/2024, despite a downward revision due to the flooding.