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Column: Funds reject CBOT soy complex but cling to bullish wheat bets

FORT COLLINS, Colo. (Reuters) - Speculators were big sellers of Chicago-traded corn, soybeans and soybean products last week as uncertainty over the coronavirus and doubts about the Phase 1 trade deal between the United States and China roiled commodity markets.

A combine harvests wheat in Corn, Oklahoma, U.S., June 12, 2019. REUTERS/Nick Oxford

However, investors’ bullish Chicago wheat views escaped the prevailing pessimism despite another price slide. In the week ended Feb. 4, money managers extended their net long position in CBOT wheat futures and options to 52,161 contracts from 48,469 a week earlier, according to data published Friday by the U.S. Commodity Futures Trading Commission.

But unlike in the previous few weeks, the latest wheat move resulted entirely from short-covering. Funds very slightly reduced their outright longs from last week’s record high. Open interest jumped 3% through Feb. 4 to the highest levels in 11 months.

Most-active CBOT wheat futures rose fractionally over the last three sessions and commodity funds were predicted to have been light buyers of wheat futures. Funds’ latest Chicago wheat stance is the most bullish since August 2018, but prices have been easing for a couple weeks.

By Friday’s close, futures were down nearly 34 cents per bushel or 6% since their Jan. 22 high. Money managers are less enthusiastic toward Kansas City wheat futures and options, as they cut their net long to 8,261 contracts through Feb. 4 from 9,384 in the previous week.

Funds have held a mildly bullish outlook on K.C. wheat since late December. But it has been a year and a half since they have had positive feelings toward Minneapolis wheat futures and options, and investors increased their net short position through Feb. 4 to 4,629 contracts from 3,532 in the week before.


Speculators have been very hot and cold toward soybeans in recent months, but selling was prominent across the entire soy complex last week with new records set in the products.

In the week ended Feb. 4, money managers boosted their net short in CBOT soybean futures and options to 82,358 contracts from 50,955 a week earlier, bringing their three-week selling total to nearly 89,000 contracts. Open interest surged nearly 7% on the week.

Market watchers have been weighing the potential effects of coronavirus on Chinese demand, especially when it comes to the recently signed Phase 1 trade agreement, which in theory, should boost U.S. soybean sales to the Asian country.

Beijing told U.S. officials Friday that it would still honor the terms of the deal despite delays from the virus. But China’s primary soybean supplier, Brazil, is in the early stages of harvesting what is expected to be a record crop. Brazil’s real currency hit an all-time low on Friday, which makes it favorable for Brazilian farmers to sell dollar-denominated soybeans.

Although soybean futures rose fractionally at the end of last week, commodity funds may have slightly extended bearish bets on the oilseed. Soy products were also up fractionally during the same period, and funds were seen as net sellers of oil and net buyers of meal.

Money managers’ net short position in soybean meal hit a record-large 64,377 futures and options contracts on Feb. 4, up sharply from 39,719 in the prior week. That tops the long-standing high of 55,215 contracts set in September 2006.

The latest move marked funds’ largest-ever weekly soymeal selloff when they were already net short at the start, and it was the third largest selling week among the entire history since mid-2006.

Outright shorts in meal also hit a new record as of Feb. 4, surpassing 100,000 contracts for the first time.Funds have been unusually bullish toward soybean oil since late last year, but in the latest week, they shed their outright long positions at a record pace, while keeping their gross shorts nearly unchanged.

That led to a reduction in their net long to 67,885 contracts from 96,738 in the previous week, one of the biggest net sell-offs on record. CBOT corn futures have been relatively elevated compared with the previous few years ever since the U.S. planting issues arose last May, though investors have been pessimistic toward the yellow grain since August.

Money managers increased their net short in CBOT corn futures and options to 55,990 contracts through Feb. 4 from 29,476 a week earlier, marking their first week of net selling in corn since early December. The move was equally comprised of new shorts and long exits, and open interest rose 2% during the period.

Commodity funds were pegged as slight net buyers of corn futures between Wednesday and Friday, as the most-active contract rose fractionally during that time.

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

Editing by Lisa Shumaker