(April 6): Hedge funds have turned net bullish on wheat for the first time in nearly four years, betting on higher prices driven by dry weather in the US and a shortage of fertiliser and fuel arising from the war in the Middle East.
Long positions on Chicago wheat outnumbered short contracts by 8,641 in the week ended March 31, according to weekly data published Friday by the US Commodity Futures Trading Commission. This reversed a net-short position that had persisted since June 2022.
The shift was driven by a surge in long positions to 117,375 lots, the highest total in more than six years. Short positions fell to 108,734 lots, according to the CFTC data.
The US-Israeli war with Iran, now in its sixth week, has caused severe damage to energy infrastructure in the Middle East and disrupted fuel and fertiliser flows through the Strait of Hormuz that links the Persian Gulf to global markets.
Farmers across the world are rushing to secure supplies of critical inputs and, in some cases, switching to crops that are less dependent on nutrients. War-related disruptions are leading to concerns around food security and have reversed sentiment in agricultural markets that were earlier pressured by ample supply. In March, wheat prices hit their highest in a year before paring gains.
See also: Middle East conflict weighs on global food prices, FAO says
Wheat prices have also been supported by prolonged dryness in the US Plains, which has threatened production in a key growing area. However, showers were expected in some areas this week, according to the US Weather Prediction Center. The latest forecast, as well as some profit-taking, contributed to a decline in prices on Monday.
Prices:
- Wheat fell 1.3% to US$5.90 a bushel as of 12.25pm Singapore time.
- Soybeans were down 0.3% and corn fell 0.8%/
Uploaded by Arion Yeow
