Column: Funds downvote CBOT wheat and corn despite thin global supplies

A combine harvests winter wheat in Corn
A combine harvests winter wheat in Corn, Oklahoma, U.S., June 12, 2019. REUTERS/Nick Oxford/File Photo

NAPERVILLE, Ill., Nov 14 (Reuters) - Chicago grain futures have either reached or flirted with all-time highs this year amid tight world stocks and disruptions to Ukrainian exports, but that narrative has lost steam this month.

As of Nov. 8, money managers’ net short position in CBOT wheat futures and options rose nearly 6,000 contracts to 42,902 contracts, their most bearish stance since June 2020, according to data published Monday afternoon by the U.S. Commodity Futures Trading Commission.

That was funds’ fifth consecutive week selling CBOT wheat, meaning they sold even as Russia pulled out of the Ukraine export deal at the end of October. That happened in the week ended Nov. 1, when most-active futures surged 8%.

It is worth mentioning that the week through Nov. 1 ended just before Russia re-entered the deal, and the Nov. 1 close just above $9 per bushel was the highest in recent weeks.

Futures plunged 8% in the week ended Nov. 8, once again causing the trade to significantly overestimate wheat selling. Since mid-March, there have been just two weeks in which fund buying or selling in wheat has exceeded 10,000 contracts (50 million bushels) despite several epic price fluctuations.

Open interest in CBOT wheat futures and options is the lowest for the date since 2008, though it has risen 10% in the last three weeks along with a 3% fall in futures, supportive of funds’ increasingly negative views.

Wheat futures have shed more than 1% in the last four sessions, ending at $8.18-1/2 per bushel on Monday.

Money managers’ gross CBOT wheat longs are the lightest for the date since 2008, and their shorts are largely average. Corn and soybean gross shorts remain very low, though funds’ corn shorts last week rose to an 11-week high.

Through Nov. 8, money managers cut their net long in CBOT corn futures and options to 237,662 contracts from 271,960 a week earlier. That was their largest corn sell-off since early July, fueled by both a reduction in longs and the addition of shorts.

Other reportable speculators through Nov. 8 also staged their largest corn sell-off since July as most-active futures fell more than 4% during the week. Terrible U.S. corn export demand and continued shipments out of Ukraine encouraged the selling.

Corn futures through Monday were down another 1.5% since Nov. 8, though soybeans have held on better, falling fractionally over the four days. Soybeans were basically unchanged through Nov. 8, but money managers bought the oilseed for a fourth consecutive week, increasing their net long to 103,908 futures and options contracts from 101,329.

That followed the previous week’s net buying of nearly 26,000 soybean contracts, the most for any week since late January, fueled mostly by new longs. Soybean futures had surged nearly 5% through Nov. 1, supported by strength in soy products, particularly oil.

Most-active CBOT soyoil futures on Friday traded to the highest levels since mid-June. Money managers through Nov. 8 added more than 5,000 futures and options to their net long, which reached 105,210 contracts, the most since early March 2021 and their most bullish for the time of year since 2016.

Money managers’ soymeal views are their most bullish ever for the date, expanding about 2,000 contracts through Nov. 8 to 95,420 futures and options contracts despite futures falling more than 1% in the week.

Most-active soymeal has dropped more than 3% since Nov. 8, and soyoil is up 1.7%.

Managed money net position in Chicago wheat futures and options

Karen Braun is a market analyst for Reuters. Views expressed above are her own.

Writing by Karen Braun Editing by Matthew Lewis

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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As a columnist for Reuters, Karen focuses on all aspects of the global agriculture markets with a primary focus in grains and oilseeds. Karen comes from a strong science background and has a passion for data, statistics, and charts, and she uses them to add context to whatever hot topic is driving the markets. Karen holds degrees in meteorology and sometimes features that expertise in her columns. Follow her on Twitter @kannbwx for her market insights.