Column: Funds’ CBOT Grain Selling Spree Picks Up Pace

(Reuters) – Speculators continued to sell Chicago-traded grain and oilseed futures and options into mid-February, but that pace has likely increased in the days since.

Data from the U.S. Commodity Futures Trading Commission (CFTC) published on Tuesday showed that hedge funds and other money managers crept deeper into bearish territory in CBOT corn, wheat and soybeans in the week ended Feb. 12.

Many market participants had originally thought that investors entered February with a relatively favorable attitude toward the grains, but data published within the last week confirmed otherwise. CFTC data has been on a delay due to the partial U.S. government shutdown that ended a month ago.

Although CFTC’s Commitment of Traders data will not catch up to regular speed until March 8, recent market action has given analysts a pretty good idea of speculators’ current views toward the market, which are likely unfavorable.

In the week ended Feb. 12, money managers flipped to a net short in CBOT corn futures and options of 14,693 contracts from a net long of 14,370 a week earlier. Funds held a net long in corn of 128,177 contracts on Dec. 18.

According to daily estimates of fund activity collected by Reuters, the corn short has grown to around 77,000 contracts through Tuesday. CBOT May corn lost more than 1 percent in both Monday’s and Tuesday’s trade, when most of the recent selling is thought to have occurred.

Through Feb. 12, money managers also flipped to a net short in CBOT soybean futures and options of 10,038 contracts compared with the previous week’s net long of 5,989 contracts.

Daily estimates suggest commodity funds extended their net long in soybeans to about 33,000 contracts through Tuesday. Traders have treated soybeans very generously since December due to a pending trade deal between the United States and its key customer China, especially given record domestic supplies.

But the market has been running out of patience for a deal to be inked. U.S. President Donald Trump pushed back the deadline for a deal, which was originally this Friday, to an unspecified date, expanding the window of uncertainty on the future of agricultural trade between the two countries.

U.S. Agriculture Secretary Sonny Perdue on Friday announced that China had agreed to buy 10 million more tonnes of U.S. soybeans as part of the ongoing negotiations, but those sales have yet to materialize and may not make a sufficient dent in U.S. supply.

Money managers extended their long position in the CBOT oilshare, which measures soyoil’s share of value in the soy products, to 64,088 futures and options contracts through Feb. 12. This is funds’ most bullish view in the oilshare since late September 2017.

Much of this had to do with funds’ extension of bearish bets in CBOT soybean meal, which rose to 29,629 futures and options contracts through Feb. 12 from 14,750 in the prior week. That also marked their most pessimistic view in meal since September 2017.

The managed money net long in CBOT soybean oil futures and options increased to 34,459 contracts through Feb. 12 from 28,560 a week earlier. The most-active futures contract hit an eight-month high earlier this month.

Daily fund estimates since Feb. 12 place the soyoil net long around 22,000 contracts through Tuesday. Commodity funds are thought to have expanded their net short in meal to around 41,000 contracts.

WHEAT WOES

Money managers extended their net short in CBOT wheat futures and options through Feb. 12 to 16,053 contracts from 9,143 in the prior week. But they have likely done a lot more selling in the two weeks since.

Through Tuesday, commodity funds are estimated to be holding a bearish view in CBOT wheat of about 62,000 contracts. Futures fell to contract lows for a second consecutive session on Tuesday, with the May contract finishing at $4.68-1/4 per bushel.

The wheat market had been waiting for several months to realize an increase in export demand for the U.S. product, which has finally begun materializing in the last several weeks. But that has not curbed selling interest for now. Falling prices in the competitive Black Sea region have also been unhelpful for wheat optimists.

Some market participants believe that the increasing wheat bearishness may be partially tied to the U.S.-China trade talks. Ideas have circulated that China would start buying larger quantities of U.S. grains in addition to soybeans, especially in the event of a trade deal, but confirmation is yet to be seen.

Through Feb. 12, money managers doubled their net short position in Kansas City wheat futures and options to 24,046 contracts from 12,044 in the prior week. The new position is very close to 2016’s record for the most bearish February stance toward hard red winter wheat.

Speculators were also record bearish for the time of year in Minneapolis wheat through Feb. 12. In that week, money managers shaved their net short to 8,468 futures and options contracts from 8,901 in the previous week.

Reuters does not collect daily fund estimates for K.C. or Minneapolis wheat. Since Feb. 12, K.C. May wheat has fallen 10.6 percent, closing at $4.44-1/4 per bushel on Tuesday, the contract’s lowest-ever close.

Minneapolis May wheat has fallen 2.8 percent over the last two weeks, closing at $5.55 per bushel on Tuesday.