January 21, 2011 / 9:49 PM / 7 years ago

Tight stocks prompt heavy spec buying in corn, soy

CHICAGO (Reuters) - Large speculators boosted their net long positions in Chicago Board of Trade corn and soybean futures and options after the U.S. government forecast tight supplies of both commodities, according to Commodity Futures Trading Commission data issued on Friday.

The U.S. Agriculture Department on January 12 issued a stocks forecast that put soybean supplies at their lowest level in 40 years and corn stocks at their lowest since 1995, prompting heavy buying in the futures market. Corn prices rose 8.6 percent during the week ended January 18 while soybeans gained 4.7 percent.

The noncommercial traders were net long 347,789 corn contracts as of the close of trading on January 18, up 38,777 contracts from the previous week. The large speculators also raised their net long in soybeans by 13,100 contracts to 154,834.

Prices have been rallying as the market seeks to find a level to cool down the grain purchases that threaten to deplete global supplies.

“The trading theme has been one of demand rationing,” said Mark Bradbury, portfolio manager for HGC Agricommodity. “The chatter that is dominating most trading rooms right now is just really tight stocks.”

The managed money will likely continue to snap up corn and soybean futures as a bullish market tone persists despite the recent price gains, Bradbury added.

Large speculators reversed their net long position in CBOT wheat, picking up 3,433 short positions and adding 1,887 longs. The noncommercials were net short 362 contract as of the close of trade on January 18.

Noncommercial traders bought 36,837 long corn contracts during the trading week while cutting 1,940 short positions during the same time. In the soybean market, large speculators bought 12,311 long contracts and exited 789 short positions.

Index funds, which typically hold their positions for longer periods of time than the speculators, cut back on their long stake in corn, soybeans and wheat as part of an expected rebalancing of their portfolios for 2011.

In corn, index funds added 9,914 short contracts and 2,755 longs, leaving them with a net long position of 418,959 contracts.

Index funds were net long 180,074 contracts in CBOT soybeans, down 7,667 contracts from a week earlier. Index funds added 1,671 long contracts and 3,602 shorts in CBOT wheat, leaving them with a net long stake of 203,273 contracts.

Reporting by Mark Weinraub; Editing by Lisa Shumaker

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