Tightening stocks in the US, with concerns of lower production in Brazil and Argentina and rising global demand, seem like a perfect recipe to keep agriculture and food prices simmering.
However, there are many unknowns in the market right now that could also strongly influence prices.
Grain demand from China, US acres in 2021-22, the impact of several export restrictions, and US dollar movement are some of the factors in play.
Over the past year, funds have also had a strong influence in the global grain trade, a recent report by UK's Agriculture and Horticulture Development Board said. Since early in the year, analysts have pointed to economic recovery and inflation expectations as drivers pulling investors towards commodities across the board.
In the last few days futures have moved into overbought territory and as uncertainty clears, the market should be aware of the risk of funds unwinding their positions, the AHDB report said. "If we were to see more US acres or risks for the Chinese pig herd, futures could fall, quickly," it added.
Overall, the tightening supply situation is still the key short-term market driver, but participants will be watching keenly for any new signals.