Just Suppose....

August Paris wheat expired with hardly a whimper yesterday, making heavily traded November the new front month. Indeed November is now the front month on all the NYSE/Liffe grains contracts.

The Nov contract for London wheat currently accounts for around 50% of the entire volume of open interest across all contracts. For Paris wheat it accounts for almost two thirds of all open interest.

Those are rather scarily weighted percentages.

The speculative element of that will have to exit those positions at some point. These guys aren't in it to hedge any physical trades they have. They aren't looking to take delivery of the physical goods at any price. They HAVE to sell.

The selling could start at any time and for any seemingly trivial reason. Russian export bans or not a wave of enforced selling of volumes of that kind of magnitude can only mean one thing.

Only a week ago a buying frenzy saw London wheat up GBP18 in a day at one point. That day was just last Thursday when November wheat hit a stunning GBP169/tonne, albeit briefly. As of now it is already GBP24/tonne off that high in only a week.

Yet the open interest now is still as high as it was then.

Just suppose tomorrow's USDA numbers are bearish (which they probably will be - in a "not as low as other estimates already in the market" sort of a way).

That triggers a wave of selling that makes it fall another GBP24/tonne in the ensuing week. Halfway through that stop-less selling kicks as Tarquin and his buddies suddenly have an "enlightening experience" making it fall by the same again the week after that, do you know where we'd be?

It would start with a nine not a one. How ludicrously unlikely is that eh? I mean, that would be like someone telling you at the beginning of June that wheat would be GBP169/tonne before long.