Opinions Focus

• The final days of the calendar year may see some interesting market moves
• Volume and position squaring have potential to impact
• The prospects for an extraordinary end to an extraordinary year!

Introduction

As we head into the last days of the most extraordinary year of 2022, what will wheat get for Christmas…….. A Bull or a Bear?

It has been a year of records and extraordinary prices and volatility.

The 2022 Extremes Impacting Wheat.

Throughout 2022, the World has seen some remarkable events that would most certainly not have been on the radar as the New Year arrived nearly 12 months ago.

Covid

On 1st January 2022, many were contemplating the huge influence and probable long-term aftermath of Covid.

With lockdowns around the world and China’s zero Covid policy financial and commodity markets have felt and continue to feel the repercussions.

However, equally disturbing events were about to unfold with consequences for us all.

Russia’s War

A previously unthinkable conflict erupted in Europe as Russia’s military invaded The Ukraine on 24th February. As the largest and fourth largest wheat exporting countries in the World, the turmoil inflicted upon the Global wheat markets was inevitably acute.

The Climate and Our Planet

The future of our planet has been in the spot light in an unprecedented manner, focusing on Climate Change.

The need for changes to our farming, eating and general principles have been brought into question, time and again throughout the year.

Having a more immediate effect on wheat have been the weather extremes.

Too wet, dry, hot or cold. A sense of insecurity surrounding wheat production as these drastic weather events took hold, prices were given yet more reason to move.

The Economic Earthquake of 2022

Instigated by Russia’s war, financial and commodity markets have seen enormous fluctuations in value.

The added costs burdening producers to consumers continue to be felt with many economies heading, if not already, in deep felt recession.

Wheat Production

Although a raging war has been the major focus for 2022’s wheat market, production records must not be ignored.

Russia is reported to have reaped a record wheat crop, with forecasts anywhere from 91mmt (million metric tonnes) to 100+mmt.

Australia is also forecasting their largest crop ever, with ABARES estimating 36.6mmt, up 1% from last year’s previous record.

On the other side, reports from Argentina are relentless in their downgrading of the wheat crop figures. Approaching half of the crop harvested, total production numbers have fallen from 21mmt to the current 12.4mmt, with the possibility of further reductions to come.

The Market Players

Adding to uncertainty at the year-end are the factors driven by the players, traders and funds.

Markets have, over recent months seen a greater emergence of ‘Bears’ pressure global wheat values down leading to general ‘short’ positions.

Inevitably as the year nears its end, participants will slightly alter their market exposure and positions to either lock in profits or close losses.

Volume of trades may drop as many wind-down as the Christmas holidays approach.

The combined upshot of position changing and volume decreasing has often seen interesting price movements around this period.

Logically, if there is less volume, the market impact of any meaningful desire to buy or sell will be greater. Thus, prices will move further than they may ordinarily.

Conclusions

This incredible market year of 2022 is drawing to a close, but there may be some eye-catching volatility as it ends.

Wheat markets seem to be in a ‘Bear’ mood, as the ‘Bulls’ have been eased aside since the highs of mid-May, with the last real ‘Bulls’ seen well over a month ago.

With positions to close out or alter, combined with the prospect of lower trade volume, there may be a sting in the tail. ‘Bulls’ may struggle to buy, while ‘Bears’ may struggle to sell their desired volume in a quieter marketplace.

A ‘Bull’ or a ‘Bear’ for Christmas……only a brave trader would back either.

Merry Christmas to all and we will be back in 2023!