Weekly Grains Outlook
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Wheat opinion
📉 Sentiment Indication: Concerns that the war may be moving towards CRM Agri’s Scenario 3 appear evident in signs of a greater willingness to buy agricultural commodities among both funds and importers. Sustained higher energy prices will continue to underpin ags.
Despite a lot of geopolitical noise, it is worth remembering the fundamentals underlying the current market, as well as the risks involved with trying to predict the outcome and timing of such geopolitical events, with such volatility being seen.
Current prices are following long term wheat trends which we have been highlighting over the past 6 months. The latest recovery is confirmation that this trend remains stable. (see chart above)
Market update
The Iran war, and geopolitical uncertainty, remains the overarching focus for financial markets, including grain prices, for which it has been supportive overall.
A rising tide lifts all boats is a common term used in relation to oil markets, and the tide turned into a tidal wave, in so far as oil price increases are concerned!
Headway in wheat prices has not been nearly as strong as for crude oil, reflecting the importance of the Middle East for energy. Nearly 40% of world crude oil trade passed through the Strait of Hormuz during the week ahead of the Israel-US strikes. By contrast, the region is a net importer of grains.
While Brent crude is up more than 35% spot basis since the eve of the Israel-US attacks on Iran, Chicago wheat prices have risen by 2.5%, and London and Paris futures by less than 1% in dollar terms.
However, given its decent historical price correlation with oil, wheat has attracted increasing interest by funds, which have turned net long in Paris wheat for the first time since June 2024. In the three US wheat contracts combined, managed money is net long for the first time since October 2022.
Our view remains that grain markets will be unable to shrug off sustained increases in oil prices. However, for now most are placing bets on how long the oil and gas supplies will remain disrupted. With retail investors buying up oil funds, prediction sites such as Polymarket provide useful insight: currently there is a 79% chance of oil prices trading above $100/Bbl by the end of March, with Goldman Sachs increasing March forecasts to $100/Bbl.
Its almost entirely geopolitics, rather than fundamentals, causing the latest bout of volatility!
CRM will give more detailed market analysis in its monthly market report, out later this week.
Corn opinion
📉 Sentiment Indication: Corn prices, which are like those of wheat correlated to oil values, have found support from the rise in Brent crude above $100/Bbl.
However, corn has lagged wheat, reflecting pressure from Argentina’s newly-started harvest.
Nonetheless, Argentina will apply less pressure to the corn market than it did to the wheat one, with uncertainties over Brazil’s safrinha crop, and US spring sowings for harvest-26.
Market update
Corn prices have underperformed other grains, expanding their discount to wheat to more than $1.45/Bu May-26 basis, from less than $1.10/Bu a month ago.
Versus soybeans, corn has lagged too. Indeed, its current performance may see it lose even more area to soybeans in US spring sowings than had been projected. The current ratio of 2.37 in prices of new crop November-26 soybean futures to December-26 corn ones is below average, sapping the crop’s incentive to growers.
This as prices of fertiliser – of which corn is especially needy – are soaring too.
Corn prices continue to be weighed by pressure from Argentina’s harvest. Argentine corn has in exports widened to $20/t FOB its discount to US Gulf offers. But like wheat, corn will be unable to ignore continued moves higher in oil prices.
CRM will give more detailed market analysis in its monthly market report, out later this week.
Barley opinion
The barley market has shown signs of attracting pressure, as CRM Agri cautioned of last month.
Besides competition from strong southern hemisphere harvests, the Iran war has provoked uncertainty too. Iran is the third-ranked barley importer.
Barley export prices in Rouen, France have lost their unusual premium to wheat, which had lasted since mid-November.
