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Column: Funds place record bullish bets on the CBOT soybean-corn spread

FORT COLLINS, Colo. (Reuters) - With China back in the U.S. soybean market and U.S. corn supplies seen hitting 33-year highs, speculators last week established their most bullish ever view of Chicago-traded soybeans relative to corn.

Soybeans are harvested from a field on Hodgen Farm in Roachdale, Indiana, U.S. November 8, 2019. REUTERS/Bryan Woolston

Further, investors’ views on soybeans and corn have never varied so drastically, even when considering their most bearish views toward this spread.

The current trend is largely driven by funds’ near-record pessimism toward corn. In the week ended June 9, money managers increased their net short position in CBOT corn futures and options to 297,312 contracts from 282,266 in the prior week, according to data from the U.S. Commodity Futures Trading Commission.

The new corn stance is investors’ fourth-most bearish ever behind three weeks in April 2019 when the position exceeded 300,000 contracts. The growing net short position continues to be driven by an increasing number of outright shorts, as funds have added 200,000 of them since the start of April.

Most-active corn futures last Tuesday settled more than 3% higher than on May 5, but money managers increased their net short position by more than 100,000 contracts during that period.

Corn rose nearly 1% over the last three sessions and trade estimates predict that funds slightly shed bearish bets during that time. But those predictions were off last week.

In soybeans, money managers extended bullish bets to 20,376 futures and options contracts through June 9 from 6,637 a week earlier. The recent rise in optimism has been driven by large Chinese purchases of the U.S. oilseed.

Funds’ latest moves established a record bullish view toward the soybeans-to-corn spread of 317,688 contracts. That topped the October 29, 2013 record of 296,985, which included a soybean long of 116,358 contracts and a corn short of 180,627.

Their most bearish view toward this spread totaled 277,557 contracts on April 19, 2011, when funds were long both 365,448 contracts of corn and 87,891 soybean contracts. That makes funds’ most recent position the largest-ever in absolute terms.

It is very unusual for speculators to have such diverging views on corn and soybeans in early June, as the U.S. crops are in the early stages of growth and weather risks are still possible. But with such large harvest expectations and the loss in corn demand by way of ethanol, U.S. supplies are set to rise more than 50% over the next year and speculators have been unable to spin a bullish story.


Through June 9, money managers increased their net short position in CBOT soybean meal futures and options by about 2,000 contracts to 52,986 contracts, their most bearish view since February.

During March, funds shed gross meal shorts in record fashion amid food security concerns when the coronavirus pandemic first escalated. But that trend completely reversed course at the beginning of April, and funds have added nearly 77,000 meal shorts since, the most ever for a 10-week period.

Money managers’ outright soymeal shorts totaled 88,317 futures and options contracts as of June 9, and for the month, that is exceeded only by all weeks in June 2017.

Funds ditched bullish bets in soybean oil futures and options through June 9, switching to a net short of 56 contracts from a net long of 11,376 in the previous week. That is despite a 1% rise in most-active futures during the period.

But soyoil futures slid more than 2% in the last three sessions, and funds were seen as sellers of the vegoil. They were predicted as slight net buyers of soymeal futures late last week.

Money managers extended their net short in CBOT wheat futures and options through June 9 to 25,368 contracts from 13,472 a week earlier. That was the result of both new shorts and the exit of longs.

Wheat futures have been weighed down by U.S. harvest pressure and the expectation for global crops to rebound over the next year. The U.S. Department of Agriculture supported that prediction on Thursday with its supply and demand report, calling for record global wheat stocks by mid-2021.

Funds reduced their net short through June 9 in Kansas City wheat futures and options to 18,738 contracts from 24,133 in the prior week. They also shed bearish bets in Minneapolis wheat, moving to 19,228 futures and options contracts from 21,917 a week earlier.


Graphic- Managed money net position in CBOT corn futures and options

Graphic- Spread in managed money net position: CBOT soybeans to corn (futures and options)

Graphic- Managed money outright short positions in CBOT soybean meal futures and options


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

Editing by Diane Craft