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last release: Nov 2017

Futures Markets

Oct 2017

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Source: CME - *USD per tonne

Futures prices

Prices for wheat, maize and soybeans were mostly unchanged m/m as domestic and global crop supplies remained ample for the projected demand, even as harvest delays were reported in the US. In wheat, shortfalls in some regions such as Australia were counterbalanced in other areas, particularly the Black Sea region. In maize and soybeans, the market largely shrugged off a rainy spring planting season in Brazil and Argentina where planting progress was somewhat delayed. The US dollar, which had been in a two-year downtrend until September 2017, seemed to have steadied recently as well as the price of crude oil which has been trading in the USD 50 range for most of the month. Wheat values were 6.3 percent higher respectively y/y, while maize and soybean prices were essentially unchanged. Rice prices, which surged 40 percent between April and September, were 17.2 percent higher y/y but declined over 4.5 percent m/m possibly confirming the end of its bull market.

Volumes and volatility

Trade volumes rose marginally for wheat and maize m/m and about 40 percent for soybeans. Both historical and implied volatility declined for the second successive month for all three commodities to the lower end of their historical ranges.

Basis levels and transport

Basis levels for maize and soybeans, which have remained soft in the interior for the entire past crop year, appeared steady. In Illinois, the interior bids to local elevators were quoted minus USD 13 (per tonne) under the December futures for maize and USD 14 under the November futures prices for soybeans. In Iowa, the bids were similarly steady to higher at minus USD 18 for maize and minus USD 29 for soybeans (both under the respective December and November futures). Domestic soft red wheat values were thinly quoted beneath the futures price for delivery to the northern mills. Basis levels for Gulf export delivery for maize and soybeans were weak at USD 10 and USD 9 over their respective nearby futures. Barge freight, which experienced a 30 percent spike to USD 22 (Illinois River to Gulf quotation) during September, had relaxed somewhat following replenishing rains and was 33 percent below the three year average. Exports and export commitments for all three commodities lagged behind last year’s record pace. Maize in particular showed disappointing numbers with cumulative shipments (as of 1 September , the start of the crop year) and outstanding commitments at 20 million tonnes versus 31 million tonnes last year. 

Forward curves

Forward curves for wheat, maize and soybean remained in the same configurations of seasonally wide carries as prices moved little m/m. Producer selling, as evidenced by low basis numbers, has kept pressure on the front end of these curves.  

Investment flows

Managed money continued its bear strategy in wheat and maize for the third month in a row by maintaining its net short positions, while keeping a modest net long position in soybeans. Commercials were again the natural short hedgers as they bought harvest-time quantities from the producers. All in all, trading strategies were unremarkable compared to past months of the calendar year. However, since about half of the trade volume is executed by algorithmic programmes, these strategies have become largely opaque and may include sophisticated portfolio balancing and cross market arbitrage.