‘Ludicrous’ Wheat Fuels Investor Frenzy and Farmer Angst

(Bloomberg) -- Wheat's biggest weekly surge ever is prompting investors to rush toward the amber grain while nervous U.S. farmers worry about missing out.

Wheat prices are diverging in some local markets, with the differential between cash prices and benchmark futures on the Chicago exchange plummeting as wheat buyers balk at the highest prices since 2008. That's potentially sidelining farmers who are already contending with the worst farm cost inflation in years.

“This crazed cash market scenario we are seeing because of the war is hurting farmers' ability right now to market their old and even new crop wheat,” said Mary Kennedy, an analyst at agriculture publisher DTN Progressive Farmer. Some growers say their bids have been pulled from grain elevators, she said.

Money managers reduced short positions by 11,017 contracts of futures and options in the week ended March 1, marking the least bearish position in almost three months, according to Commodity Futures Trading Commission data.  

In a sign of how hot the wheat market is getting, the Teucrium Wheat Fund has gone from about $91 million in net assets early last week to $207 million Thursday, according to Teucrium.

Retail investors are piling in as benchmark wheat futures in Chicago have risen 50% in two weeks, with the market soaring higher after Russia invaded Ukraine.

“Wheat futures are in ludicrous mode, there is no other way to say it,” said Matt Campbell, a risk management consultant at StoneX. “Futures and cash are diverging sharply. This is a very scary marketplace right now.”

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