Column: Funds stage sizable soy, soymeal selloff ahead of USDA data

4 minute read

Soybeans are seen in a field waiting to be harvested in Minooka, Illinois, September 24, 2014. REUTERS/Jim Young/File Photo

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NAPERVILLE, Ill., May 15 (Reuters) - Speculators have been easing massively bullish bets in Chicago-traded grain and oilseed futures in recent weeks, though they have been hesitant to add too many shorts due to unprecedented price levels and continuing uncertainties over global supplies.

That sentiment may have been confirmed late last week with the U.S. government’s first supply and demand outlooks for the upcoming year, which showed stocks remaining relatively narrow through mid-2023, especially for wheat.

CBOT corn and soybean futures have softened so far this month, falling a little more than 2% in the week ended May 10. In that period, money managers cut their net long position in CBOT soybean futures and options to 130,661 contracts from 153,253 a week earlier.

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That capped off their largest two-week soybean selling streak since June 2021 and their net long fell to the lowest levels since January, according to data from the U.S. Commodity Futures Trading Commission. That move was led by the removal of gross longs.

In CBOT corn futures and options, money managers reduced their net long by nearly 15,000 contracts through May 10 to 338,562, their least bullish since mid-February. Funds added gross corn shorts for a fifth consecutive week, though the adding was light.

But corn and soy futures were up late last week. CBOT December corn futures set a contract high Friday of $7.58-1/2 per bushel, and November soybeans on the same day notched their highest settle of the month at $14.98-1/4.

The U.S. Department of Agriculture on Thursday unexpectedly cut U.S. corn trend yield because of delayed planting. Although U.S. stock projections for the upcoming year came in at expectations, the supply threat to the U.S. balance sheet as well as a Ukraine corn crop 54% smaller than last year renewed jitters.

USDA also said U.S. farmers would harvest a record soybean crop in 2022, but 2022-23 U.S. ending stocks are set to grow only 75 million bushels, emphasizing the low margin for error.

Managed money net position in CBOT soybean futures and options

OILSHARE LIFT

As of May 10, money managers’ view in the CBOT oilshare, measuring soyoil’s share of value in the soy products, was the most bullish since November at 36,062 futures and options contracts. They sold nearly 39,000 soybean meal contracts in the latest two-week stretch, the most for any two weeks since May 2021.

The managed money soymeal net long as of May 10 was 52,314 contracts, the lowest since December. Most-active meal futures on Thursday hit $395 per short ton, the lowest since Jan. 26, but they ended up nearly 2% over the last three sessions.

Money managers bought less than 3,000 soybean oil futures and options contracts through May 10 and their net long rose to 88,376. Most-active futures rose 3.4% between Wednesday and Friday, settling at 83.79 cents per pound Friday, its highest finish of the month.

CBOT oilshare hit all-time highs late last week, reaching 52.7% on Thursday.

Managed money net position in CBOT soybean meal futures and options

WHEAT REVIVAL

Wheat trade had stagnated in the few weeks following the March surge to record highs, but fresh concerns about global supplies have had futures on the rise this month, particularly after USDA’s forecast late last week.

Traders have been uncomfortable with the slow pace of U.S. spring wheat planting, the poor condition of U.S. winter wheat, uncertainties in Ukraine, and unfavorable weather in India and France, among other things. USDA said on Thursday the U.S. hard red winter wheat crop would be the smallest since 1963, some 14% below what analysts thought.

USDA’s 2022-23 world wheat supply outlook excluding China is near record lows relative to demand, down from the current year. read more Paris-traded Euronext wheat futures hit contract highs on Friday, and most-active Chicago wheat reached a two-month high of $11.98-1/2 per bushel.

July Kansas City and Minneapolis wheat futures both set contract highs on Friday of $12.92 and $13.35-3/4 per bushel, respectively. So far in May, CBOT wheat had risen 11.5%, K.C. wheat 16%, Minneapolis 14% and Paris September wheat 10%.

As of May 10, money managers remained very bullish in K.C. and Minneapolis wheat and modestly so in Chicago. They slightly raised their CBOT and K.C. net longs but barely shaved their Minneapolis one, and none have undergone huge changes in several weeks.

However, trade estimates suggest commodity funds purchased 39,000 CBOT wheat futures contracts between Wednesday and Friday on 8% gains. Open interest in CBOT wheat remains the lowest for the date since 2009 and among the lowest for any date since.

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

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Editing by Matthew Lewis

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