Wheat Futures Rebound Amid War Tensions, Fund Buying Continues

Grain markets were mixed early on Thursday, but saw significant movement in wheat. Wheat futures initially dropped before rebounding and adding 'war premium' due to ongoing tensions between Russia and Ukraine. Russian President Putin's warnings about escalating the conflict put pressure on the market.

Darin Newsom, a senior market analyst at Barchart, believes that any dips in grain prices will be quickly bought by trend following funds. He notes that the markets are overbought and sees early August pressure as profit taking ahead of the month's end.

Newsom points to massive trade volumes in December corn, with over 500,000 contracts traded on Monday alone. He attributes this to unchecked fund buying, which has pushed prices to multi-year highs. While he acknowledges the risk of liquidation when a market goes straight up, he thinks funds will continue to buy breaks.

The rally in grain markets is also being driven by concerns about crop sizes, particularly in corn. Newsom notes that the August WASDE report triggered the buying, with algorithms reacting to lower USDA numbers. He believes this has contributed to the rare August rally in corn, which is counter-seasonal.

Despite the rally, Newsom cautions that fundamentals remain bearish for wheat, with ample supplies expected from the new crop. However, he notes that end users may be buying ahead of harvest time, particularly in soybeans where record exports have already been seen this month.