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last release: December 2018

Futures Markets

Nov 2018

% Change



















Source: CME - USD per tonne

Futures Prices

Prices for wheat, maize, soybeans and rice showed negligible change m/m, with soybeans rising by 2.0 percent, wheat falling by 1.2 percent and maize and rice changing little. Except for a brief advance during the first week of November when adverse weather threatened harvest prospects, prices for wheat, maize and soybeans drifted lower. The protracted stalemate over Chinese tariffs on US soybeans, as well as the effects of exogenous markets - especially energy - added further pressure to values. After reaching a four-year high in early October, crude oil plummeted by one-third from USD 76 to USD 51 per barrel, negatively impacting the demand for maize-based ethanol. Currency appreciation may have also added to bearish commodity sentiment as the USD index reached an 18 month high. Reflecting their divergent supply and demand fundamentals y/y, wheat and maize were higher by 20 and 7 percent respectively, while soybeans and rice were lower by 11 and 9 percent respectively.

Volumes and volatility

Trade volumes for wheat and maize rose nearly 50 percent m/m but fell for soybeans by 38 percent, while volumes for all three commodities were lower marginally y/y. Implied volatility and historical volatility fell for wheat and maize by varying degrees m/m while rising slightly for soybeans. Both volatility measures were higher for all three commodities y/y than the 2017 ultra-low levels. 

Basis levels and transport

Domestic basis levels firmed in the interior m/m for maize and soybeans, as a bumper harvest neared completion for the two commodities. In Illinois, the interior bids to local elevators were quoted at minus USD 11 per tonne for maize and minus USD 18 per tonne for soybeans, each under the respective December and January futures prices. In Iowa, the bids were minus USD 14 for maize and minus USD 33 for soybeans (under the respective futures). In soft red wheat, bids for delivery to northern mills were quoted at premiums to December futures prices. Gulf export delivery basis levels for maize, soybeans and wheat were about unchanged m/m, at USD 16, USD 7, and USD 22 (per tonne premium over respective futures). Barge freight (lower Illinois River quotations) dropped precipitously m/m from USD 26 to USD 16 per tonne, signaling the completion of harvest. In the export market, total export commitments (shipped and unshipped) for maize remained robust, but lagged behind in wheat on a crop y/y comparison. Soybeans experienced a steep drop in total export commitments of 10million tonnes since the start of the September 1 crop year, reflecting a 32 percent decline due to halted shipments to China. 

Forward curves

Forward curves exhibited slight changes m/m, decreasing in slope (narrowing) for wheat and widening for maize, with all curves remaining in contango configurations (upward sloping). Analysts attributed the narrowing of the y/y wheat curves (between December 18 and December 19) from minus USD 25 to USD 15 per tonne to strong basis levels and the prospect of increased exports during the second half of the crop year, particularly following a recent US gulf sale to Egypt. The widening of the y/y maize curve from minus USD 12 to USD 14 per tonne was most likely a result of the downward trend of the nearby futures. The y/y soybean spread that ended with the mid-month expiration of the November 2018 contract, expired at the widest negative level recorded for any November/November spread at minus USD 24, testifying to the gloomy export demand level and large global supplies.   

Investment flows

Managed money made modest changes to its positions m/m, decreasing its net short in wheat, increasing its net short in soybeans while switching its net long to net short in maize. Its change in trade strategies y/y from large directional bets to more sophisticated spread bets which depend on the convergence/divergence of the price differential between two contract months (e.g. March and May) is most evident in maize. Whereas, during November 2017, managed money held a net short of almost 200 000 contracts, it held a net short of only 10 000 contracts according to the most recent data. Simultaneously, managed money increased its spread positions y/y from 120 000 to 222 000 contracts. Commercials remained net short m/m in all three commodities, while swaps dealers remained the dominant net long.