While most investors focus on… oil And its derivatives in light of the Great Iran-American War Hedge funds They were quietly betting on something completely different commodity: food.
Specifically, March witnessed a major reversal in attitude towards it wheatAccording to data published by the Commodity Futures Trading Commission (CFTC). In fact, long positions outnumbered short bets by 8,641 contracts, on April 6 Bloomberg a report.
Overall, there were 117,375 bullish bets and 108,734 bearish bets in Chicago at the end of the previous month.
Such a market setup represents a significant reversal of the net short balance that has been active since 2022 as the food glut continues to pressure the world’s agriculture sectors.
Why do hedge funds keep buying wheat?
It is possible that the change in attitude towards wheat prices among hedge funds is directly related to the war against Iran and the actual blockade imposed on the Strait of Hormuz.
On a superficial level, the disruption of traffic in the waterway responsible for nearly 20% of the world’s crude oil supply has led to significant price increases for both the U.S. West Texas Intermediate crude benchmark and Britain’s Brent crude, and led to ongoing and predictable shortages of various fuels.
Under these circumstances, food prices were expected to rise even based on the rising costs of products such as diesel needed to operate agricultural machinery.
At the same time, the Persian Gulf is responsible for producing many other resources essential to the global economy, the most important of which is fertilizer – along with liquefied natural gas and helium.
So far, farmers are reportedly scrambling to obtain enough fertilizer and shift production toward crops that are less nutrient-dependent.
Elsewhere, the weather has also contributed to higher prices and fears of looming shortages, as there has been a long dry spell in the US Plains, expected to end only in the second week of April.
Why are wheat prices likely to remain high until 2026?
Finally, at press time, there appears to be little chance of supply chain issues being significantly eased in the short term. While financial markets The reaction was quick and positive In light of recent rumors of ongoing negotiations, it appears that the end of hostilities is far from sight.
Moreover, even if a ceasefire is reached, many production facilities in the Persian Gulf will take weeks, months, or even years to repair and resume production, meaning reopening the Strait of Hormuz will only be the beginning. From a long trip Towards the recovery of the global economy.
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