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Column: Funds purge CBOT wheat, soy and meal shorts amid virus uncertainties

FORT COLLINS, Colo. (Reuters) - Speculators nearly erased bearish bets last week in Chicago-traded soybeans and they brought their wheat bullishness back to life, though this was largely due to short covering, which was a very dominant theme across CBOT grains and oilseeds in the latest period.

Field of ripe wheat ready for harvesting is seen in Corn, Oklahoma, U.S., June 12, 2019. REUTERS/Nick Oxford?

Hedge funds and other money managers flipped back to a net long position in CBOT wheat futures and options through March 24, according to data from the U.S. Commodity Futures Trading Commission. The new net long of 17,670 contracts compares with a net short of 5,659 in the previous week.

Funds’ record-large outright wheat longs followed by their record purge of those longs has recently driven shifts in the net position, but short covering was almost entirely responsible for the latest move. Outright wheat shorts numbered 44,699 as of Tuesday, the fewest since May 2011.

Wheat futures have recently surged as panicked shoppers load up on items such as pasta and bread amid the coronavirus pandemic. Wheat rose modestly again late last week, hitting a two-month high on Friday as top supplier Russia was again mulling export limits to protect domestic supplies. Another key exporter, Ukraine, is monitoring the situation and will take measures if needed.

Market watchers are also awaiting 2020 U.S. planting intentions from the Department of Agriculture on Tuesday, and wheat acres are expected to be record low. Historically low winter wheat plantings had already been reported back in January, and analysts see spring wheat acreage falling slightly from last year’s levels.

Money managers have been bearish toward spring wheat for more than 18 months, though they trimmed their net short in Minneapolis wheat futures and options to 16,307 contracts through March 24 from 19,925 a week earlier.

Like in CBOT wheat, investors have recently shed short positions in Kansas City wheat, leaving gross shorts at 40,834 contracts as of March 24. That is the fewest since September 2018. The managed money net short fell to 5,356 futures and options contracts from 13,306 in the previous week as a result of the short covering.

Outright longs in K.C. wheat also reached low levels through March 24 at 35,478 contracts, a four-year low. Outright CBOT longs in the previous week were the fewest since July 2016.

Most-active CBOT wheat futures rose 1.7% over the last three sessions, and commodity funds are predicted to have extended their bullish stance.

MEAL BONANZA

In the week ended March 24, money managers slashed their net short in CBOT soybean futures and options to 2,444 contracts from 30,646 in the previous week, driven entirely by short covering. In the four weeks to March 24, funds dumped nearly 94,000 gross soybean shorts.

U.S. soybeans still face some concerns with export demand, but futures have been lifted recently thanks to strong gains in soymeal on an expected pickup in demand. In the week ended March 24, most-active soybean and soymeal futures recorded their largest five-day percentage rise since July 10, 2017.

Logistics in Argentina, the top exporter of soy products, has also been of concern. Argentine crushing plants have seen soybean supplies fall as the coronavirus lockdown has prevented their delivery in some cases, despite being deemed essential by the government. Argentine port workers have also requested a temporary suspension of export activity.

Through March 24, funds established their most bullish soymeal stance since October 2018, boosting their net long to 39,099 contracts from 16,100 in the prior week. The latest four weeks marks funds’ most aggressive-ever streak of buying in meal.

That is almost entirely the result of short covering. In the four weeks ended March 24, funds eliminated 103,379 outright short positions from their meal stance, more than double the pre-2020 record for a four week stretch. Outright shorts totaled 17,252 as of Tuesday, the fewest since June 2018.

Money managers sold soybean oil futures and options for the tenth week in a row through March 24 under the crippling of global oil demand due to coronavirus. That flipped funds to a net short of 746 contracts from a net long of 1,712 in the previous week, and that is their first bearish oil stance since September.

Soybean futures fell fractionally to end the week, and oil rose while meal dropped. Trade estimates pegged funds as net sellers of beans and meal and net buyers of oil.

NO-GO ON CORN

Despite rallies in other CBOT contracts, corn has not really participated due to a slew of price-negative factors facing the yellow grain. The biggest one right now is the slowdown in global oil demand, which has shuttered some U.S. ethanol plants. Ethanol production is a major consumer of U.S. corn.

New-crop corn futures are at 14-year lows for the month, but market analysts believe USDA on Tuesday will peg U.S. corn plantings for 2020 at a seven-year high. After an awful start to 2019-20, U.S. corn export demand has finally picked up a little in recent weeks, but a big Brazilian crop is on the way.

In the week ended March 24, money managers extended their net short in corn futures and options to 108,549 contracts from 91,846 a week earlier.

That was largely due to a reduction in outright longs, which totaled 134,490 contracts as of March 24, the fewest since late April 2009. Funds have pulled both longs and shorts from their position in the latest four weeks.

Corn futures dropped fractionally late last week, with trade estimates pegging funds as light net sellers of futures between Wednesday and Friday.

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

Editing by Daniel Wallis

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