Speculative traders, including investment funds, have recently reduced their net-short positions in key grain and oilseed futures markets.

The latest data, shows that as of September 10, ‘managed money’ held the smallest net-short positions in Chicago wheat and soyabeans since early June.

Similarly, Chicago maize saw the smallest net-short position since late May.

This reduction in net-short positions comes amid rising uncertainty in global markets, leading to the incorporation of more ‘risk premium’ into prices.

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Drier weather in the US, causing concerns over maize and soyabean yields, and ongoing drought in Brazil are key factors affecting maize and soyabeans. Additionally, recent cuts to EU crop estimates, coupled with concerns over Black Sea grain crop access, have further increased market volatility, particularly for wheat.

Holding short positions allows traders to profit when prices fall, but rising prices can lead to losses, requiring them to ‘cover shorts’ to minimise these losses. On the other hand, holding long positions enables traders to profit from a rising market.

Market movements and short covering

The reduction in short positions often supports price gains, and this has been evident in recent weeks. From August 27 to September 10, Chicago wheat futures (Dec-24) gained 7%, while Chicago maize (Dec-24) rose 3%, and Chicago soyabeans (Nov-24) increased by 1%.

Looking ahead, if crop estimates decline further or access to Black Sea grain is threatened, there is potential for more short covering, which could accelerate price gains. Conversely, if some of these risks are mitigated, such as better-than-expected US yields, market sentiment could turn negative, and traders may re-build their net-short positions, potentially weighing on prices.

UK feed wheat and global price trends

Meanwhile, UK feed wheat futures for November 2024 closed at £183.70/t on Tuesday, down £1.45/t from Monday’s close. The May 2025 contract also dropped by £1.20/t, closing at £196.90/t. These declines mirrored global trends, with both Chicago and Paris milling wheat futures for December 2024 falling by 0.5% and 0.6%, respectively. Geopolitical tensions between Russia and Ukraine, coupled with ongoing drought conditions that had previously driven prices upward, provided less support as competitive Black Sea exports continued.

In contrast, the Paris rapeseed futures market saw an uptick, with the November 2024 contract closing up €5.25/t to reach €463.00/t. The May 2025 contract also rose by €4.00/t, closing at €466.25/t.