CHICAGO (Reuters) - Speculators seem ready to put extreme pessimism toward Chicago-traded corn behind them, chipping away at their once-record short position last week despite another sag in futures near contract lows.
In the week ended Nov. 28, money managers cut their bearish bets in CBOT corn futures and options to 196,763 contracts from 210,466 in the prior week, according to data from the U.S. Commodity Futures Trading Commission.
This went against market expectations as the most-active March contract dropped a sizable 2 percent over the period, and the spot December contract dipped to an all-time low on Tuesday.
Funds’ new corn stance is easily their most bearish for the time of year, but it is well off their all-time record of 230,556 futures and options contracts set mid-last month. (reut.rs/2zVAzdM)
According to trade sources, commodity funds have slashed another decent-sized portion of their bearish stance in the days since as they were outright buyers of the yellow grain.
Technical buying including end-of-month short covering was the primary driver of the corn market late in the week. March corn soared 2.6 percent over the last three sessions, hitting a three-week high on Friday.
However, ample world supplies and dismal U.S. export prospects will continue to challenge any further upside price moves in the near term.
Speculators’ other standout move last week was that they switched to a short position in the CBOT oilshare, which measures soyoil’s share of value in soy products. (reut.rs/2AMLreb)
Although funds are still long both products, the soybean meal long is larger than that of soybean oil, hence the short oilshare position.
This marks specs’ first bearish oilshare stance since early May, and in the meantime they hit an all-time record long position in the second week of September.
Money managers notched their third-biggest buying week of the year in CBOT soybean meal futures and options in the week ended Nov. 28, moving their net long to 38,700 contracts from 15,909 a week earlier.
Soymeal futures have been mainly supported by a potentially unfavorable weather pattern unfolding in Argentina, the world’s leading supplier.
On the flipside, funds recorded a fairly large sell-off in soybean oil futures and options, establishing a new net long position of 26,398 contracts compared with 47,664 the week prior.
Speculators are likely even more bearish the oilshare heading into this week. Traders suggested that commodity funds were straight buyers of soymeal and straight sellers of soyoil between Wednesday and Friday.
The U.S. Environmental Protection Agency in particular soured the mood in the soyoil market on Thursday as it announced the 2019 blending requirement for soy-based biodiesel fuel will be unchanged from 2018 at 2.1 billion gallons, which disappointed those expecting an increase.
Despite mixed trade in CBOT soybeans last week, money managers increased their bullish stance to 31,662 futures and options contracts from 20,144 in the previous week.
January soybean futures ended last week mostly unchanged, and there is no reason to believe that funds’ view toward the oilseed is significantly different heading into this week.
Speculators were net sellers across all three wheat contracts in the week ended Nov. 28. They notched record shorts for the time of year in both soft and hard red winter wheat but have likely backpedaled in the days since.
CBOT December wheat hit contract lows for three straight sessions ending on Nov. 28 as global supplies and strong competition out of the Black Sea lowered hope for U.S. exports.
Money managers extended their bearish stance on Chicago wheat futures and options to 122,774 contracts from 108,666 in the prior week. This is just a couple of thousand contracts larger than specs’ year-ago stance. (reut.rs/2AMOO4B)
In K.C. wheat, funds slightly increased their net short to 24,230 futures and options contracts from 20,741 a week earlier. The new stance is nearly identical to that of 2015, and funds were bullish on hard red winter wheat during the same week in 2016.
Enthusiasm for Minneapolis wheat declined for the first time in five weeks, as funds cut their bullish view to 5,716 futures and options contracts from 7,011 in the previous week.
Trade sources indicate that commodity funds were straight buyers of CBOT wheat over the last three sessions. March futures gained more than 2 percent during the period, the largest three-day climb in nearly a month, primarily on bargain buying following the contract lows.
The potential for a strong storm in Eastern Australia to threaten up to one-fifth of the wheat crop over the weekend also provided support on Friday.
But the global oversupply story is unlikely to fade anytime soon. Traders were reminded of this on Thursday amid another round of lackluster U.S. export sales.
(The opinions expressed here are those of the author, a market analyst for Reuters.)
Editing by Matthew Lewis