March 26, 2018 / 5:30 PM / 4 months ago

Funds finally hit the brakes after their CBOT buying spree: Braun

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

Corn is dumped into a grain cart from a combine during a harvest near Dixon, Nebraska, U.S., October 26, 2017. Picture taken October 26, 2017. REUTERS/Lucas Jackson

By Karen Braun

CHICAGO (Reuters) - Speculators broke an eight-week buying trend in Chicago-traded corn and soybeans last week after their bullish bets had mounted at a record pace.

Selling also prevailed in the soybean products and in wheat, though the cumulative effect on funds’ optimistic view toward futures and options on the Chicago Board of Trade was not as drastic as the week’s price activity may have suggested. (tmsnrt.rs/2G5FM1P)

In the week ended March 20, hedge funds and other money managers cut their net long position in CBOT corn futures and options to 213,231 contracts from 233,063 in the prior week, according to data from the U.S. Commodity Futures Trading Commission.

Trade estimates had pointed to a sharper decline of at least 59,000 contracts last week. May corn futures dove 4.4 percent during the reporting period, the contract’s largest percentage loss in a five-day stretch since August.

Money managers also modestly trimmed bullish bets in CBOT soybeans to 195,522 futures and options contracts from 208,200 in the previous week, which was more in line with expectations.

In soybean meal, funds dialed back their net long position to 99,478 futures and options contracts from 111,449 a week earlier. They also increased their net short in soybean oil to 24,920 futures and options contracts from 21,221.

Technical selling was prominent in the corn and soybean markets through March 20, and wheat losses offered additional pressure to corn. Rains for drought-stricken crops in Argentina and the southern U.S. Plains also had traders on the sell button.

In the days since, technical buying as well as shrinking forecasts for the Argentine corn and soybean crops had futures marching back after Monday’s steep losses.

But jitters over trade tension between the United States and China sent market participants into a frenzy on Friday, and corn and soybean futures plummeted early on in the session. Both countries had issued a list of one another’s goods that were up for tariffs, though China’s did not appear to include soybeans as many had feared.

At the end of Friday’s volatile trading session, May corn settled up 1-1/4 cents while May soybeans settled down 1-1/2 cents, well off the earlier lows.

Nonetheless, trade sources indicate that commodity funds have been net sellers of soybeans and soybean oil and straight buyers in corn and soybean meal over the last three sessions.

WHEAT MOVES

Although some much-needed rain arrived for hard red winter wheat in the U.S. Plains a week ago, the drought has taken a toll and the crop is unlikely to dazzle. Commodity funds generally appear to agree.

In the week ended March 20, money managers slightly extended their net long in K.C. wheat futures and options to 29,586 contracts from 28,946 in the prior week, though they also reduced outright long positions in the process.

But Chicago wheat received no love from the market as CBOT futures got battered during the period. The week included the most-active contract’s largest three-day percentage loss in almost five years, which was 7.8 percent.

Money managers ramped up their net short in Chicago wheat futures and options to 56,107 contracts from 35,584 in the week before. This was linked to the wetter pattern across the drought-stricken U.S. Plains as well as weak demand for U.S. wheat.

But toward the end of last week, forecasts for this same region started to trend drier. Friday also featured some bargain-buying following the earlier sell-off, and these factors probably mean that funds are heading into the week of March 26 with a less bearish view than the latest data reflects.

Speculators flipped back to a bearish stance on Minneapolis-traded spring wheat through March 20. The new managed money net short totals 653 futures and options contracts versus the previous week’s net long of 1,240 contracts.

This new bearish position may be short-lived pending trade on Monday and Tuesday. May spring wheat futures were up 1.6 percent on Friday, the contract’s largest daily percentage gain in three weeks.

Editing by Matthew Lewis

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