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Column: Funds wage CBOT selling spree as big U.S. crops and China tensions loom

FORT COLLINS, Colo. (Reuters) - Speculators were big sellers of Chicago-traded grains and oilseeds last week, as prospects for newly planted U.S. corn and soybean crops looked positive and risks mounted for agricultural exports as U.S.-China tensions escalate.

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

Funds have grown especially bearish toward corn just as the U.S. growing season is ramping up, and that has led to short-covering rallies in past years. But corn faces unique challenges this year with U.S. stockpiles set to expand by more than 50% over the next year to 33-year highs, driving futures to the lowest pre-harvest levels since 2006.

In the week ended May 19, hedge funds and other money managers extended their net short position in CBOT corn futures and options to 245,386 contracts from 214,054 in the prior week, according to data from the U.S. Commodity Futures Trading Commission.

The selling came despite a nearly negligible decline in futures prices during that period, and the new stance is funds’ most bearish ever outside of their two-month record run a year ago.

On the commercial side, things had been looking very similar to last year, at least until now. Through May 19, the producer position in corn futures and options was a net short of 3,722 contracts. April 2019 was the only time on record where producers held a net long corn position.

Breaking down the producer stance reveals that the numbers of gross corn longs and shorts have recently been on par with a year ago, when U.S. farmers were extremely reluctant to make any sales given the relatively low prices.

That suggests farmers are unwilling sellers this time around too, with prices much worse now. New-crop December corn futures during late April and early May were around 12% lower this year than last. But as of Friday the decline was 20%, since new-crop corn was already over $4 per bushel a year ago.

Most-active corn futures slid another 1% late last week and trade sources suggest commodity funds added to their short position between Wednesday and Friday.


Much like the action in corn, soybean prices came under pressure last week on improving weather forecasts for U.S. crops. But soybeans also struggled as trade tensions continued to simmer between the United States and China, its largest soybean customer.

So far, Beijing has expressed its intentions to fulfill the terms of the Phase 1 trade deal, requiring greatly increased purchases of U.S. agricultural goods. China bought its second largest haul of U.S. soybeans in more than a year during the week ended May 14, but things have been quiet since.

Money managers were strong sellers of CBOT soybeans in the week ended May 19, reducing their net long to 12,064 future and options contracts from 32,465 a week earlier. In the days since, funds likely continued to sell, though they were seen retaining their net long through Friday.

Funds also made hefty sales of soybean meal through May 19, boosting their net short position to 29,404 futures and options contracts from 11,127 a week earlier. That is their most bearish meal view since late February.

Soybean oil was the only grain or oilseed contract money managers were friendly to last week. They flipped to a slight net long of 2,681 futures and options contracts through May 19, from a net short of 7,865 contracts in the prior week.

Funds had been strongly bullish toward soybean oil late last year and into February, but they turned moderately bearish once the coronavirus outbreak hit global oil markets.


Money managers through May 19 established their most pessimistic view on Chicago wheat futures and options since early October after what was a record-long run in bullish territory. They flipped to a net short of 16,476 contracts from a net long of 2,982 contracts a week before.

Funds’ Kansas City wheat views were also hit hard last week, as they flipped to a net short position of 15,038 futures and options contracts. That compared with a net long of 3,895 a week prior.

The selling in wheat futures had been linked to rising global supplies and concerns that export competition would tighten as a result, but fresh fears surfaced last week over crops in the Black Sea, including top exporter Russia. Russian agencies cut harvest estimates late last week on recent dry weather, and funds were seen as net buyers of Chicago wheat futures in the last three sessions.

Additionally, crop scouts in the top U.S. winter wheat state of Kansas estimated the state’s crop at 284.4 million bushels on Thursday, below the U.S. government’s latest prediction of 305.5 million bushels. Tour scouts saw dry conditions and April frosts limiting yield potential.

The top U.S. spring wheat state, North Dakota, has had historic struggles with planting this year, but investors still cannot find a bullish story. In the week ended May 19, they extended their net short position in Minneapolis wheat futures and options to a fresh record of 25,401 contracts from 24,643 the previous week.

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

Writing by Karen Baun; Editing by Tom Brown