Column: Funds Buy Record Chunk of CBOT Corn Amid U.S. Sowing Troubles

(Reuters) – The slow, rain-plagued U.S. corn and soybean planting season finally irked speculators last week as they bought a record amount of Chicago-traded corn with no real ease to the sowing delays in sight.

Commodity funds had built an unprecedentedly large bearish corn position that peaked a month ago, and they remained historically short in the weeks since as they awaited a break in the rains and some decent planting progress.

That progress has not arrived. As of May 19, U.S. farmers had sown only 49% of the intended corn acres compared with an average of 80%, and that is the slowest pace in 40 years of records. Conditions were likely too wet again last week to have made substantial progress, and investors started to get spooked.

In the week ended May 21, hedge funds and other money managers slashed their net short in CBOT corn futures and options to 116,729 contracts from 282,918 in the previous week, according to data from the U.S. Commodity Futures Trading Commission.

About 81% of that move was outright short covering rather than the addition of new longs, and it was funds’ largest weekly net purchase of corn on record at 166,189 futures and options contracts.

That narrowly edged the previous weekly record of 165,128 contracts set in the week ended June 30, 2015. That purchase had been sparked by fears that excessive rainfall in the Midwest would reduce yields and bullish stocks and acres data from the U.S. government.

The associated price move was much lighter in 2019, however. In the week ended May 21, most-active CBOT corn futures rose 25.5 cents per bushel (7%), but the gain in the week ended June 30, 2015, was 54.5 cents (15%)

The smaller 2019 price move could be due to large amounts of corn held by the producer relative to previous years. Producers sold a record amount of corn futures and options contracts in the week ended May 21, some 159,778 contracts, topping their previous record of 145,577 in the week ended July 11, 2017.

As of May 21, producers held a net short of 164,294 corn futures and options contracts. A year earlier, producers’ net short was significantly larger at 534,715 contracts.

Back in 2015, most-active corn futures would rally another 30 cents from June 30 to hit their July 13 high of $4.51-3/4 per bushel. On Friday, the contract closed at $4.04-1/4, above $4 per bushel for the first time in exactly a year and up 53 cents from two weeks prior.

Trade estimates suggest that commodity funds bought around 40,000 corn futures contracts between Wednesday and Friday. July corn futures rose 10 cents during that period.

Weather forecasts heading into the three-day holiday weekend suggested that wet weather would likely continue across the U.S. Midwest through the end of May, which is very close to the crop insurance cut-off date to plant corn for most areas.

WHEAT AND SOYBEANS

CBOT wheat has also rallied on the wet U.S. weather, sparking concern for both spring sowing and excessive moisture potentially damaging winter wheat in the Southern Plains.

managers drastically reduced their net short position in CBOT wheat futures and options in the week ended May 21 to 41,760 contracts from 78,461 in the previous week. That was the largest weekly purchase since January 2018.

However, the excitement in wheat tapered off a little bit mid-last week. U.S. farmers planted a quarter of their spring wheat acres as of May 19, bringing planting progress to 70% complete versus an average of 80%. Winter wheat conditions also rose 2 points to 66% good-to-excellent, which is historically good.

But wheat jumped again on Friday with most-active futures finishing at $4.89-1/2 per bushel, its highest settle since February. Commodity funds were presumed to be net buyers over the last three sessions.

Money managers reduced bearish bets in Kansas City wheat futures and options through May 21 to 48,084 contracts from 56,424 a week earlier. They also trimmed their net short in Minneapolis wheat to 12,175 contracts from 12,399.

Soggy Midwest weather is also causing planting delays for U.S. soybeans, but investors know that bean acres are prone to rise if farmers cannot get the corn in, since the soybean planting period is longer. The unresolved trade dispute between the United States and top soybean buyer China remains a huge weight on the market as well.

In the week ended May 21, money managers reduced their net short position in CBOT soybean futures and options to 153,131 contracts from a record 168,835 in the previous week. Although this was funds’ largest short reduction in two months, the new soybean stance is still the third-largest on record.

In soybean oil, funds cut their net short position to 68,940 futures and options contracts from 80,406 in the previous week. They also reduced their short in soybean meal to 35,014 contracts from 39,633.

Most-active soybeans rose about 1% over the last three sessions, and commodity funds were pegged as net buyers, but not to a significant degree. They were also seen as buyers of meal and light buyers of oil.