Barley is shown in a pile. Overlayed on top of the image is another photo of a person’s hands holding money.

By Clare Stanfield

Even the most casual of commodity market watchers couldn’t possibly have missed grain prices plunging off a cliff at the end of February. Did some genie magically replenish global grain stocks while no one was looking? What gives?

“Market fundamentals have not changed that much,” says Bruce Burnett, director of markets and weather information with Glacier FarmMedia. “In fact, you could argue they’ve gotten a lot better recently, so it has to be something outside of that.”

He has his eye on speculative money skewing grain markets. He is concerned with the impact that speculation has had on prices but is looking forward to the ship righting itself soon. But in the meantime, it’s a bumpy and slightly scary ride for farmers.


“We’re tracking all of this in slow motion,” says Burnett. The first hint something was going on came from the Commodity Futures Trading Commission (CFTC), an independent U.S. agency that regulates derivative markets and issues weekly reports on what traders are committing to in those markets. “The reports show you who’s going long, who’s going short — they give you an idea of the trends.”

He says that in February, the CFTC weekly report showed funds going remarkably short on many ag commodity futures being traded through Chicago and, to a lesser extent, Kansas City and Minneapolis. “The question was: why are traders taking this position?” says Burnett.

It’s worth pausing here to say that there are two types of commodity traders — commercial and speculative, or non-commercial. Burnett explains that commercial traders tend to live in the world that uses the grain they are trading on — they use futures to hedge their positions on grain they need for, say, a processing plant.

Speculative traders play in the world of commodities on paper — they will never use the grain, but they do use futures to make money. Burnett is quick to point out that speculation provides liquidity, so it is not a bad thing to have in the markets, but it can sometimes create situations like that cliff diving in February.

“The speculative money coming into the market in February decided that wheat prices were too high, so they were going to sell short,” he says. It was their bet against the market, a guess that wheat prices would fall, and speculative investors would profit as a result.

Burnett says the Chicago numbers for soft wheat were particularly staggering. The CFTC’s report showed that, for the week of February 28, there were 51,307 long contracts and 142,948 short contracts resulting in a net short of 91,641. “That net short number is basically 458 million bushels of Chicago wheat,” he says. “And if you take a look at how much U.S. soft red winter wheat was produced in 2022 alone — which was 337 million bushels — that’s almost a crop and a half short.

“So this is partly why the markets went down,” says Burnett. “They were fairly neutral up until the sell-off, futures were net long before that.” He adds that wheat prices were also affected by a number of international factors, such as a very large Australian crop and high Russian exports. “So, there are also some physical reasons these markets went short, it’s not all speculation.”


A portrait of Bruce Bernett, who is pictures wearing a navy polo shirt and glasses, smiling brightly. He is the Director Of Markets And Weather Information for Glacier Farmmedia.

“The speculative money coming into the market in February decided that wheat prices were too high, so they were going to sell short”

Bruce Burnett Director Of Markets And Weather Information Glacier Farmmedia

“We’re in the transition period,” says Burnett. India’s wheat crop is in, China’s is getting underway and the U.S winter wheat is emerging from dormancy, all while our spring wheat crop has yet to go in the ground.

Still, the short selling fallout in February has set wheat prices back. “On February 21, March contracts on spring wheat were trading at US$9.26 per bushel, and on March 1 they were down to US$8.15 per bushel,” he says. “Canadian cash values have not dropped quite as much — 75 cents to a dollar over the same time period.

“The fundamentals remain very strong for Canadian wheat. We’re exporting a lot of it lately and there have been no disruptions at the West Coast,” says Burnett. “We are on pace to beat our record export year, which was in 2020-21. It’s really spectacular, and it’s helping to support our prices right now.”

He understands that the recent and dramatic price drops across all crop commodities have made farmers very nervous going into this spring, but he thinks the worst is over. “I think the sell-off was overdone. We had a lot of speculative money moving in and creating a situation — and it doesn’t take much money to make that happen — but it’s starting to bounce back a bit.”

And while that may be true, Burnett says it’s wise not to expect the pre-Christmas prices to return. “Some of this is probably a permanent drop-off in price — we see it in oil and other commodities, too, driven largely by recession fears.

“But outside of a disaster happening, we’re going to see grain prices higher than average, if still a little lower than last year.”