Speculators have a huge role in commodity markets. They provide liquidity and speed up the movement in the market.
Love them or hate them; they have a value. Farmers love them when they move the market higher, less so when doing the opposite.
In recent months, the invasion of Ukraine has gained the interest of speculators. They have bought into wheat contracts as they speculate on increasing values.
When the speculators go ‘long’ this means they have bought into the market, hoping for an increase. Conversely, when they go ‘short’, this means that they are hoping to gain from a falling market.
In the past four weeks, we have seen the long decrease. It still remains a strong bought position, but the level has shrunk.
The reality is that the market is still quite supported due to the fundamental drivers (EU and US weather) and the continuing conflict in Ukraine. The biggest bear factor is if Ukraine is able to open for exports.