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Column: Funds push CBOT corn long to decade high as U.S. weather risks brew

FORT COLLINS, Colo. (Reuters) - Speculators have been buying Chicago-traded corn since August when troubles began for the 2020 U.S. harvest, and that enthusiasm expanded even more last week as weather concerns are on the radar for the 2021 crop.

Corn is harvested near Austin, Manitoba, Canada March 23, 2020. REUTERS/Shannon VanRaes

In the week ended April 13, money managers increased their net long position in CBOT corn futures and options to 401,993 contracts from 386,619 a week earlier according to the U.S. Commodity Futures Trading Commission.

That is funds’ most bullish corn stance and their first time past the 400,000 mark since January 2011. Traders had pegged the corn long to blow past September 2010’s record of 429,189 contracts, but the buying fell far short of expectations.

U.S. corn planting is in its infancy, but April is likely to remain cooler than normal and threatens to slow progress. Soil conditions are very dry, especially in the Northern Plains, which could raise crop risks down the road and contribute to potential drought.

The market has also been eying dryness for some of Brazil’s second corn along with robust global demand, which with the cold weather pushed CBOT corn to contract highs on Thursday. Most-active May futures rose above $6 per bushel for the first time since June 2013 and December corn reached $5.17.

Corn open interest jumped 4% in the week ended April 13 and most-active futures were up 4.6%. New-crop corn led the way in the last three sessions, rising 1.6%, and commodity funds are seen slightly extending their bullish bets.

The dry conditions in the Northern Plains have also been a factor for Minneapolis wheat, which rose 6.2% in the week ended April 13. The May contract on April 14 set a contract high of $6.68-1/2 per bushel and futures rose just over 2% between Wednesday and Friday.

Money managers boosted their Minneapolis wheat net long to 9,680 futures and options contracts through April 13, up more than 4,000 on the week and immediately following a record two-week selloff.

Funds sold Kansas City wheat for a ninth consecutive week, reducing their net long to 11,028 futures and options contracts from 14,510 a week prior. That is their least optimistic view since September, and it comes despite a 5% rise in nearby futures during the week. The May contract rose another 4.2% in the last three sessions.

In Chicago wheat futures and options, money managers increased their net short by less than 6,000 contracts to 13,217. However, most-active futures rose 4% between Wednesday and Friday, and trade estimates suggest funds erased their net short by the end of the week.

SOYBEANS AND PRODUCTS

Through April 13, money managers reduced their net long in CBOT soybean futures and options to 142,258 contracts from 154,305 a week earlier. That is nearly their least bullish soybean stance since August.

Funds are far less optimistic on soybeans than in October, when their net long reached nearly 240,000 contracts. Most-active futures are 37% stronger now than they were then, and they are only 2% off their March highs after rising 3% between Wednesday and Friday.

U.S. farmers have a wider window to plant soybeans than corn, so the market is not yet worried about soybean planting. But concerns remain over Chinese soybean demand as crushing has fallen and new cases of African swine fever have been popping up.

New-crop November soybeans have sharply lost ground versus December corn over the last 10 days. That soybean-corn ratio in early April was historically elevated at levels above 2.6, which normally favors beans, but it fell below 2.5 last week.

Funds staged their largest soybean meal selloff in nearly a year through April 13, shedding more than 17,000 contracts from their net long and bringing it to 43,830 futures and options contracts, their least bullish since September. That was on a 2.8% decline in futures, but they added all that back in the last three sessions.

Money managers added just over 4,000 futures and options contracts to their soybean oil net long, lifting it to 81,165 contracts as of April 13. That snapped a six-week selling streak and came despite a drop in nearby futures.

Both May and July soybean oil futures rose 6% in the last three sessions amid strength in soybeans and competing global vegetable oil markets, so funds are seen solidly maintaining their long. They have not been bearish the vegoil since last June.

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

Editing by Matthew Lewis

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