Greed isn’t good

Hedge funds continue to be very bearish on corn and wheat, sitting at record short positions in the futures markets.

The International Grains Council came out with their most recent estimate for the 2015/16 crop year with global grain and oilseed production pegged at 1.95 Billion tonnes (three per cent above the five-year average) and demand estimated at 1.97 Billion tonnes, just 1 million tonnes short of the record from the 2014/15 crop year. We need to keep in mind that there is a big carryout that is still being worked through, which is why prices remain generally depressed. However, there are more and more analysts who are looking at the amount of bears in the wheat market as the catalyst to push things higher (Disclaimer: this does not mean we’re getting back to $10 wheat any time soon).

Hedge funds continue to be very bearish on corn and wheat, sitting at record short positions in the futures markets. While there has been some resiliency behind this short call by the managed money sector, if the market remains range-bound between lines of support & resistance, then traders may start dumping their short positions, a move that would support prices to the upside. Many analysts (including yours truly) agree that the world bearish fundamentals have already been priced into wheat and corn. With that in mind, any upside in the futures markets may be just incorporated into the basis (i.e. a 40 cent move to the upside in the futures, but 20 cents could be taken by the basis!). Take into account that Canadian Loonie has been appreciating against the U.S. Dollar, that’s just more price action that the basis will likely account for (versus just straight cash).

The market is generally believing that North American production will be marginally below the 2014/15 harvest but I was always told not to count my chickens before they hatch. M.A.R.S., the agronomy division of the European Commission, is of the same mindset as while they upped their estimates for average wheat yields in Europe to 87.6 bu/ac, winter barley, to 103.5 bu/ac, and rapeseed to 57 bu/ac, they did put out a warning that most of the continent would be in need of some good precipitation soon or their yield forecasts would drop (this includes parts of Russia & Ukraine).

Here in Western Canada, with StatsCan suggesting less canola acres this year, the 2015/16 caryyout could be a little tight, especially with a new crush plant in Camrose, AB, but I’m still looking at Europe as more of the price leader over the next six weeks or so. For wheat, StatsCan’s estimate of 24.8 million acres (up almost four per cent from 2014) doesn’t help anyone who’s expecting prices to go higher. Barley acreage up 10 per cent to 6.45 million acres is more an indication of growing international demand but oats prices certainly aren’t buying acres like Statsan is suggesting at 3.65 million (up almost 30 per cent year-over-year). As for the pulses and flax, whose numbers came in below expectations, you still shouldn’t be using 40 cent/lbs for lentils and $10 yellow peas for your cashflow projections because that is more of a hope than a legitimate plan. Prices remain above their 10 year averages for most lentils and yellow peas, and with the acreage numbers a little lower than people were expecting, some optimism for higher prices is warranted but just like hope, greed is not a good marketing strategy either.

To growth,


Brennan Turner



Brennan Turner is originally from Foam Lake, SK, where his family started farming the land in the 1920s. After completing his degree in economics from Yale University and then playing some pro hockey, Mr. Turner spent some time working in finance before starting, a risk-free, transparent online and now mobile grain marketplace (app available for iOS & Android). His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email ( or phone (1-855-332-7653).