Column: Funds staged biggest corn selloff since May ahead of USDA data

FORT COLLINS, Colo. (Reuters) - Speculators in the first week of September sold a lot more Chicago corn than had been expected, though their bullish bets remain seasonally strong as the market continues seeking direction following last week’s relatively mundane update from the U.S. government.

FILE PHOTO: Corn is loaded onto a truck as a silo is emptied at a farm in Tiskilwa, Illinois, U.S., July 6, 2018. REUTERS/Daniel Acker/File Photo

Key numbers from those reports, including U.S. corn and soybean yields, came in close to predictions, something that has been rare in the last year. Large misses by the market have frequently caused excessive price volatility on report days, though futures through Monday stayed comparatively quiet.

In the four-day week ended Sept. 7, money managers reduced their net long position in CBOT corn futures and options to 215,172 contracts from 258,785 a week earlier, according to data published late on Friday by the U.S. Commodity Futures Trading Commission.

That was their second-biggest corn selling week in just over two years, the top one being a week in early May 2021, and the selling was about double what had been expected. Funds’ corn stance as of Sept. 7 was among their least bullish within the last year.

Money managers reduced their net long in CBOT soybean futures and options to 57,516 contracts through Sept. 7, their least optimistic view since early August 2020. That marked three consecutive weeks where funds were slowly shedding longs and adding shorts.

Speculators have generally avoided holding short corn and soybean positions within the last year as prices soared. But bears may be testing the waters, as money managers’ combined gross corn and bean shorts on Sept. 7 hit the highest level since December at 82,480 contracts, still historically light for any time of year.

Heading into the U.S. Department of Agriculture’s Friday update, the most recent Commitments of Traders data extended through Aug. 31, leaving the market’s pre-report awareness of fund activity somewhat stale.

Most-active corn futures just ahead of the report had fallen about 4.5% since Aug. 31 and most-active soybeans were down around 1.7%.

Through Monday, both corn and soybeans were up about a half-percent since Sept. 7, the latest COT data period, and commodity funds’ positions are seen largely unchanged from that date.

But futures are generally drifting lower. Most-active corn on Friday dipped below $5 per bushel for the first time since Jan. 25 and most-active soybeans on the same day hit their lowest point since June 25. December corn on Monday ended at $5.13-1/4 per bushel, well off the May 7 high of $6.38, though easily the contract’s strongest price for this time of year in nine years.

Corn and soybean futures can struggle to rally into and during the U.S. harvest unless smaller crops are anticipated or if demand is unusually strong. Demand has recently been shakier compared with the robust levels seen over the past year, and the market is generally OK with USDA’s latest outlooks for corn and soy production.

USDA raised U.S. corn production by 246 million bushels versus last month, coming in just under 15 billion bushels and 54 million bushels heavier than analysts thought. Corn yield at 176.3 bushels per acre was up 1.7 from last month and just 0.5 bpa above the trade guess.

Usually, final U.S. corn yield is not lower than the August forecast if the September number is higher than in August, as was the case this year. But that has happened before, most recently in 2018, when the corn yield outlook was too generous in September.

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

Editing by Matthew Lewis