Column: Funds trim bullish CBOT grain bets ahead of steep selloff

4 minute read

A load of soybeans is dumped into an elevator hopper during harvest season at Deerfield AG Services grain elevator facility in Massillon, Ohio, U.S., October 7, 2021. Picture taken October 7, 2021. REUTERS/Dane Rhys/File Photo

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NAPERVILLE, Ill., June 26 (Reuters) - Market participants have been trying to anticipate the moment when speculators lose their appetite for Chicago-traded grains and oilseeds, and signs of that may have surfaced last week with a historic selloff in futures.

Investors have been lugging around sizable bullish grain bets for almost two years now, leaving the market susceptible to large price declines should funds change their minds.

However, they were more tepid sellers in the days leading up to last week’s big downturn.

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CBOT corn and soybean futures fell in the four-day week ended June 21, though they had notably strengthened in the middle of that period before starting their decline on Tuesday.

Through June 21, money managers sold the equivalent of about 65 million bushels of CBOT corn futures and options, reducing their net long position to 265,264 contracts or about 1.33 billion bushels.

In CBOT soybeans, they shed about 44 million bushels, bringing their net long to the equivalent of 772 million bushels or 154,413 futures and options contracts. November futures dropped 1% during the period and December corn fell 2.7%.

Funds’ corn and soybean selling matched up to what had been expected for the week, but those predictions were far overdone for Chicago wheat, where market participation has been much lighter than usual.

Money managers through June 21 pulled out gross wheat longs for a fifth consecutive week, dropping the net long by 3,000 futures and options contracts to 3,935, or 19.7 million bushels. CBOT September wheat had plunged 7.3% in the period.

Speculators also removed gross longs in corn and soybeans, though a third straight week of short covering in corn emphasizes the lack of certainty given the strong prices and high volatility.

In the soybean products, money managers’ bullish soymeal views surpassed their soyoil ones for the first time in two months, aligning with the significant loss of ground for CBOT oilshare this month. Soymeal was the only U.S. grain or oilseed contract featuring gains through June 21.

Managed money combined net position in CBOT/MGEX futures and options

START OF SOMETHING BIGGER?

Fears of an economic slowdown have recently rattled global commodity and equity markets, and that was particularly true for the grains. Selling was heaviest on Thursday, and trading volume in Chicago corn futures was the largest since Feb. 24.

December corn fell 3.9% in the last three sessions, coming as much as $1.21 per bushel off the May high. The Tuesday-Thursday selloff magnitude was comparable with events in both 2021 and 2019, but such a decline has otherwise been rare. read more

November soybeans shed 5.7% between Wednesday and Friday, at one point almost $1.76 per bushel off the June 9 high. Soybeans bounced 0.6% on Friday, while corn added 2.8%.

September Chicago wheat closed lower on Friday after falling 5.1% over the last three sessions, reaching the lowest point since March 2. Last week’s wheat trading volumes were above recent levels but only half those from early March when futures hit records.

Commodity funds are expected to have sold 17,500 CBOT corn futures, 31,500 soybean and 11,500 CBOT wheat futures between Wednesday and Friday.

Adequate weather for much of the U.S. Corn Belt kept pressure on grain and oilseed futures, though many areas are dry and in need of rainfall. Models on Friday suggested decent chances for rain in early July, though hot temperatures could return by mid-month.

Traders on Thursday will be watching the U.S. Department of Agriculture’s June acreage survey, which is expected to show an increase in corn plantings from the March survey and a decrease in both soy and spring wheat. Sowing pace of corn and spring wheat was notably slower than normal this year.

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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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.