CHICAGO (Reuters) - Speculators had begun last week to reverse their heavily bearish attitudes toward Chicago-traded corn and soybean futures, but in an all-too-familiar fashion, U.S. government numbers took the wind out of the sails once again.
The U.S. Department of Agriculture on Friday published its quarterly stocks report, which reflects U.S. corn, soybean and wheat supply as of Sept. 1. All three of these numbers came in heavier than expected, especially corn, which landed above the range of analyst guesses.
These stock reports have historically produced some of the biggest daily moves in the Chicago Board of Trade futures market. This time around, the ample inventories had investors re-evaluating the rounds of short covering that had occurred in the days prior.
In the week ended Sept. 25, hedge funds and other money managers cut their net short position in CBOT corn futures and options to 112,779 contracts from 141,276 in the previous week, according to data from the U.S. Commodity Futures Trading Commission. (tmsnrt.rs/2OpvCk4)
Funds bought only 28,497 corn contracts during the week, far below the trade’s 70,000-contract estimate. But they extended bearish bets further over the past three sessions, particularly on Friday with an estimated selling volume of 22,000 contracts.
For corn and soybeans, Sept. 1 stocks represent the final carryout for the 2017-18 year that concluded on Aug. 31. Corn stocks came in at 2.14 billion bushels, though half of the analysts polled by Reuters expected to see sub-2 billion.
One of the stories that corn bulls have relied on is the drastic drop in U.S. carryout on the year. The automatic addition of 138 million bushels onto the 2018-19 balance sheet puts a damper on that narrative, but any potential carryover demand from the previous year could lighten this load.
The other thorn in corn bulls’ sides is the massive yield expectations for the U.S. crop, which is amid the harvest season. The same factor has also clouded spirits in the soybean market, in addition to the continued absence of its largest bean customer, China.
Money managers reduced their short position in CBOT soybean futures and options through Sept. 25 to 58,614 contracts from 69,813 in the previous week. But the new stance remains within the same 30,000-contract window that investors have been in for the past three months. (tmsnrt.rs/2Oli8FR)
Sept. 1 soybean stocks landed at 438 million bushels, and more than half of the analysts polled prior to the report expected sub-400 million. Part of the increase came from a 19 million-bushel addition to last year’s soybean harvest.
November soybeans closed down 9-1/2 cents on Friday at $8.45-1/2 per bushel, still well off the near-decade low of $8.12-1/4 a bushel set on Sept. 18. However, trade sources suggest that commodity funds’ selling on Friday only slightly outpaced buying in the previous two days.
In the soy products, funds cut record-bearish views in soybean oil through Sept. 25 to 85,782 futures and options contracts from 109,950 in their largest weekly oil purchase in more than two years. But the position is still immensely pessimistic from a historical standpoint.
Money managers maintained a bullish stance in soybean meal futures and options, trimming their net long by just 684 contracts to 21,205 contracts. Trade estimates suggest commodity funds were net buyers of soy products between Wednesday and Friday.
Speculative activity in the wheat market was little changed last week from the previous week. In the week ended Sept. 25, money managers trimmed their slight net short in CBOT wheat futures and options by 260 contracts to 1,119 contracts. (tmsnrt.rs/2OlOfoN)
They cut bullish bets in Kansas City wheat futures and options to 34,030 contracts from 37,084 in the previous week, and reduced their bearish Minneapolis stance by just 53 contracts to 2,876.
USDA placed Sept. 1 wheat stocks at 2.379 billion bushels, above the trade guess of 2.343 billion. U.S. wheat production came in at 1.884 billion bushels, above the expected 1.872 billion.
The wheat harvest was boosted by a larger-than-predicted spring wheat crop of 623 million bushels, the third-largest on record behind 1992 and 1996.
Most-active wheat futures ended September at the highest levels in three years, but enthusiasm has been waning as a decrease in global exportable supplies has not yet lifted business for U.S. shippers. At the same time, market-watchers are still trying to get a handle on just how much wheat No. 1 exporter Russia will ship this year.
Weekly U.S. wheat sales hit a six-week high on Thursday of 657,100 tonnes, though year-to-date sales remain at nine-year lows. However, total bookings for 2018-19 will likely soon surpass those of 2015-16, which was the slowest export season for wheat in more than 40 years.
Commodity funds are estimated to have been straight sellers of wheat over the past three sessions, with volumes being moderate.
(The opinions expressed here are those of the author, a market analyst for Reuters)
Editing by Matthew Lewis