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last release: April 2017

Futures Markets

Mar 2017
Average*

% Change

M/M

Y/Y

Wheat

157

-2.4

-7.9

Maize

143

-1.8 

-0.2

Rice

213

-- 

-5.9

Soybeans

367

-3.7

+12.2

Source: CME - *USD per tonne

  • Futures prices: Prices for wheat, maize and soybeans fell m/m, reversing the trend of steady increases since late last year. A burgeoning South American supply situation, particularly for maize and soybeans, and timely rains in US winter wheat belt eclipsed investor confidence in “reflationary momentum” ascribed to a new US policy framework. In addition, the USDA March 31 planting intentions report showed record soybean acres which could temper wheat and maize price increases even as acres for the latter two commodities showed y/y declines, although weather should now be the largest factor in price determination over the next 6 months. Wheat, maize and soybean prices were lower by 2.4, 1.8 and 3.7 percent respectively m/m. Wheat prices remained well below their levels from a year ago, showing a 7.9 percent decline, while maize was almost unchanged and soybeans continued to reflect a significant 12.2 percent appreciation over last year. Rice prices were unchanged as they continued to trade in a narrow channel and were 5.9 percent below last year’s levels. 
  • Volumes and volatility: Wheat, maize and soybean volumes showed significant volume drops of 42 percent m/m, although not atypical for March when traders await the planting intentions report and resume trading activity in April during the start of planting season. Wheat and maize reflected marginally higher levels of implied and historical volatility while soybeans showed lower implied and higher historical volatility levels. All three commodities continued to operate in a relatively low volatility environment.
  • Basis levels: Basis levels for wheat, maize and soybeans drifted lower m/m in some parts of the interior, upending the normal seasonal tendency to tighten. In Illinois the interior bids to local elevators were quoted below the May futures prices at minus USD 11 and minus USD 14 per tonne for maize and soybeans respectively, while in Iowa the bids for the respective crops were minus USD 16 and minus USD 30. Domestic soft red wheat values were sparsely quoted as some elevators only posted values for June new-crop arrival. Gulf export quotations also were slightly lower by a few USD per tonne at around USD 14 for maize, USD 10 for soybeans and USD 18 per tonne for SRW (soft red winter wheat) over the respective May futures. Barge freight declined m/m slightly to USD 14 per tonne (Illinois River to Gulf quotation), sustaining a price trend of 33 percent lower than the three year average, despite overall increase in barge traffic. Export sales continued at a heightened pace, reflecting 57 percent higher y/y. while cumulative exports of 94 million tonnes was 29 percent higher y/y for the respective marketing years of wheat, maize and soybeans. [Mar 16 report]
  • Forward curves Forward curves for wheat and maize remained in the same upward sloping configuration (contango) m/m as they have all crop year. Soybeans, facing increased export competition from South America, showed a further relaxation of the inverse (backwardation) between the July 2017 and November 2017 contracts (referred to as the old crop/new crop spread). This spread, which had exhibited USD 17 inverse during January, showed a marked decline to about USD 1 per tonne by end month. All three commodities experienced deliveries against their March contracts indicating a continued oversupply situation at interior points, relative to futures prices.
  • Investment flows: Managed money was again very active in wheat, maize and soybeans. Managed money added about 85 000 contracts to its net short position in wheat, while in maize, it executed its second directional change since the New Year, this time reversing its net long to a net short stance as it sold about 240 000 contracts (30 million tonnes) m/m. In soybeans, managed money reduced its net long by over 90 000 contracts, ending with a modest long. Analysts claimed that managed money’s net positions in advance of the planting intentions report were the most bearish since the CFTC began to publish the disaggregated reports. Unsurprisingly, following the USDA planting intentions report, soybeans declined while wheat and maize rose as managed money trimmed bets in all three commodities.