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Column: Funds purge soybeans at faster clip than when trade war began

FORT COLLINS, Colo. (Reuters) - Chicago-traded soybeans have been priced below $9 per bushel for nearly two weeks now. But speculators still felt they were overvalued last week as they sold the oilseed more than they did during June 2018 when the U.S.-China trade war was just beginning.

FILE PHOTO: Soybeans are loaded onto a truck at a field in the city of Chacabuco April 24, 2013. REUTERS/Enrique Marcarian/File Photo

In the week ended Dec. 3, hedge funds and other money managers extended their net short in CBOT soybean futures and options to 99,019 contracts from 42,941 a week earlier, according to data published Friday by the U.S. Commodity Futures Trading Commission.

That places their two-week net selling total through Dec. 3 at 117,471 futures and options contracts, easily beating the previous two-week record of 94,228 contracts set in the period ended June 12, 2018.

Through Dec. 3, funds also set three-, four-, and five-week selling records in soybeans, with the latter two also topping highs notched in the lead-up to the U.S.-China trade war. The previous three-week record was set in the period ended Dec. 26, 2017.

The two-week total of 117,471 contracts was the most impressive relative to the previous high, which was bested by 25%, so it is interesting to compare the associated price moves within each period.

In the two weeks to Dec. 3, most-active futures fell 40.5 cents per bushel or 4.4%, and the contract finished on Dec. 3 at $8.71 per bushel. The comparative decline through June 12, 2018 was 69 cents or 6.7%. Most-active futures ended at $9.54 that day, and funds still held a slight net long of 12,870 contracts, which was quickly erased just days later.

The trade war between the United States and its top soybean buyer China has dragged on for nearly 18 months, which continues to nag at investors. There have been several instances in which it seemed the two sides were close to an agreement, but resolution has fallen through each time.

The U.S.-China mood warmed once again at the end of last week, as Beijing confirmed that it will waive import tariffs for some U.S. soybean and pork shipments. Most-active futures rose 2.1% between Wednesday and Friday, the contract’s largest three-day percentage gain since Oct. 2.

Trade estimates suggest that commodity funds bought around 20,500 soybean futures contracts over the last three sessions.


Speculators have not been optimistic about CBOT corn prices since mid-August, though they cut their net short through Dec. 3 to 85,137 futures and options contracts from 116,072 in the previous week.

Recent industry estimates suggest that global corn supplies are plentiful given projected demand, and most-active corn futures had spent most of the last two months at five-year highs for the time of year. The contract ended at $3.76-3/4 per bushel on Friday after skidding 1.2% over the last three sessions, and trade sources indicate funds’ corn short has likely climbed back above 100,000 contracts.

Money managers increased bullish bets in Chicago wheat futures and options through Dec. 3 to 20,567 contracts from 10,475 a week prior. Most-active futures on Nov. 29 hit their highest levels since June, and prices have declined since then. Funds were seen as light sellers of CBOT wheat between Wednesday and Friday.

Through Dec. 3, money managers trimmed their net short in Kansas City wheat futures and options to 14,252 contracts from 16,851 a week earlier, and the new stance was the least bearish since July. However, they extended their net short in Minneapolis wheat futures and options to 22,526 contracts from 20,579. The record Minneapolis short is 23,071 contracts set in mid-September.

Speculators were net sellers in soy products through Dec. 3. They cut their net long in soybean oil futures and options to 59,178 contracts from 66,884 a week prior, and they extended their net short in soybean meal to 43,910 futures and options contracts from 32,308.

Soybean oil futures surged 3.4% over the last three sessions, the most-active contract’s largest three-day jump since mid-September. That primarily owed to big gains on Friday. Soybean meal futures were also up 1.6% during the period after a significant boost on Thursday. Funds were seen as buyers of both products late last week.

The opinions expressed here are those of the author, a market analyst for Reuters.

Editing by Cynthia Osterman