FACTBOX: Agriculture futures flash green around the world as rain batters the US

Global agricultural futures contracts have in the past month experienced one of the most volatile periods in recent history.

A trade war between the US and China initially sent the value of grains, oilseeds and meals lower earlier this month before wet weather in the US has seen them rally sharply over the past five weeks.

With analysts saying lost acreage across the Midwest could be the highest in decades, the following is a factbox on where current futures prices are and why they have moved.

CBOT Corn

Corn futures on the Chicago Board of Trade have rocketed 27% in a little more than two weeks to their highest level in three years as sodden ground in vast swathes of the Midwest is preventing farmers from planting.

The rally was made more dramatic as initial expectations were of a bumper crop next year that would see 92.8 million acres planted due to a trade war that meant farmers would shy away from producing soybeans.

But the fact just 58% of corn was in the ground as of Sunday versus a five-year average of 90% means some analysts expect more than 10% of acreage will be lost - up to 10 million acres - and overall yields for the rest of the crop will be lower.

That has sent an almost record short held by managed money to collapse by almost two-thirds over the past few weeks to 116,000 lots.

Some analysts now expect that front-month corn futures could rally as strong as $5.20/bu.

"Most are pegging managed money at around 55,000 contracts short after yesterday’s buying," Advance Trading's Kelly Herrick told Agricensus - meaning another 100,000 contracts may have been wiped off the net short in the last week.

CBOT soybeans

Soybean futures hit their highest level in five weeks on Wednesday, spiking to $8.91/bu, and leaving the contract 10% up on where it was just two and a half weeks ago.

Soybean plantings remain even further behind than corn, with 29% in the ground compared with an average of 66% at this stage of the year.

Some analysts are expecting up to 3 million of an expected 84.6 million acres will be lost as well as perhaps lower yields, although others say it is way too early to predict the impact.

Two factors have so far prevented a sharp rally in beans: firstly there is still more time to get the crop in the ground as soybeans are planted a little later than corn; and secondly, ending stocks of soybeans are expected to be a record high of almost 1 billion bushels by the end of next year (27 million mt).

With stock-to-use ratio at about six months, that has stalled some short covering so far.

CFTC data published Friday showed a reduction to 159,000 lots from 169,000 lots a week earlier.

An additional factor is the expectation of generous government subsidies to soybean farmers from President Trump's $16 billion farm aid package that could encourage them to plant as much as possible.

Chicago wheat

While wheat has not generally suffered the wet weather that is hitting corn and soybean markets, Chicago wheat is 24% higher since it hit a low of $4.185/bu on May 13, trading at $5.2075/bu as of Wednesday morning.

Unloved by the market a fortnight ago, question marks over weather in the US have seen a record net short positions cut – a move that has sent the benchmark wheat contract soaring.

SRW-growing regions were moved lower in a Tuesday night crop conditions report from the USDA, in line with a wider reduction in quality ratings for the US wheat crop – with notable cuts to North Carolina and Missouri.

Kansas City wheat

The Kansas City hard red winter contract has been the standout performer of the various wheat grades, rallying 26% since touching 13-year lows in mid-May.

Concerns over the condition of the wheat crop – which has been left standing in the flood-hit fields that corn and bean farmers cannot get into – were made worse when HRW-growing regions were hit by severe storms last week.

On Tuesday night the USDA lowered its weekly ratings for winter wheat crop, cutting the proportion rated as in either good or excellent condition 5 points to 61%, with notable reductions in Kansas, Oklahoma, and South Dakota.

As in Chicago, wheat bears have been left scrambling to cover a record net short as the market has turned against them, a shift that has exacerbated the size of the move.

Curiously, even with the recent rally, the HRW spread to SRW has remained at near-record highs owing to the relative size of the anticipated crops – with HRW still trading around a 40-point discount to SRW on Wednesday.

Minneapolis wheat

The hard red spring contract in Minneapolis has tracked the wider wheat market higher, although its performance has been less spectacular – rising 12% from a low of $5.06/bu on April 30 to $5.665/bu on Wednesday.

Spring wheat planting has shaken off fears there could be similar delays to corn and soybean planting, with Tuesday’s progress report showing planting up 14% week-on-week to 84% completed – not far off a five-year average of 91%.

Paris wheat

Paris milling wheat futures have also tracked US prices higher despite little concern over the size and condition of the European crop so far.

A lower euro against the dollar has provided some superficial support to the contract, but – as in Chicago and Kansas – it is investors stepping back from huge bets against the market that has provided the bulk of support.

Prices are up 12% since a May 13 low and were trading at €188.50/mt on Wednesday morning, even as the European Commission came out and raised its production forecast to its highest levels since 2015.

Weather charts have shown little of concern in most of the continent’s major wheat growing regions, but with the crop entering its most crucial development stage over the coming weeks the market will be watching for any deviation from the norm.

DCE soymeal

Soymeal on the Dalian Commodity Exchange – a key feedstock for animal feed in China – is near a six-month high at CNY2,954/mt ($427/mt) after rallying 11% in the past five weeks.

The main factor forcing price up is the cost of importing soybeans, which have risen with futures.

But exacerbating that trend is a yuan that has weakened 3% against the US dollar over the past five weeks.

The rally also comes as demand for soymeal in China is the weakest in years due to the ongoing epidemic of African swine fever.

CZCE rapemeal

Rapemeal – another key ingredient for animal feed – traded on the China Zhengzhou Commodity Exchange jumped almost 5% overnight to CNY2,597/mt ($375/mt), hauled higher by soymeal on the Dalian.

Rapemeal is at its highest in slightly more than a year, after rapeseed production in the EU – the second biggest producer globally – suffered on prolonged dry conditions.

As well as soymeal, an ongoing political spat between Canada and China has underpinned the value of rapemeal, with Canada is the biggest exporter of rapeseed to China.