Has the correction in grain prices overshot?
Australia & New Zealand Bank sounded a rare, bullish
note in grain markets - where wheat hit an eight-month low this week, and
Chicago's May corn contract came within an ace of matching it, by cautioning
over the extent of investors' "negative tone".
December corn futures, for instance, the benchmark contract
for the upcoming US autumn 2013 harvest, had, in falling to $5.40 a bushel in
early deals, reached "a level below where December 2012 corn futures traded at
this time last year", ANZ senior ag economist Paul Deane said.
"Yet global stocks for both corn and wheat are lower than
this time last year.
"This leaves markets highly vulnerable to any production
issues over the next five months."
'Prepare for a rally'
As an extra potential support for prices, the April-to-June
period "also represents the lower period of supply for grain consumers", Mr
The market's weakness offered "an opportunity to position into
grain markets for any rally into the next quarter".
He seized on Kansas hard red winter wheat as the best bet
for long exposure, given both "more supportive" fundamentals for higher quality
wheat, compared with the lower spec grain traded in Chicago, and the extent of
speculators' negative positioning.
Managed money, a proxy for speculators, held a net long
position of 1,754 contracts in Kansas wheat futures and options as of last
week, a historically low number, and down from levels above 50,000 lots in
Beside an outright bet on call options in Kansas wheat, the
bank suggested as an alternative a long bet in futures hedged against Chicago corn.
The bet reflected the fact that Kansas wheat appeared "underpriced"
relative to corn on a near-term futures basis.