Column: Funds Continue Selling CBOT Corn and Soybeans Amid Benign U.S. Weather

(Reuters) – The U.S. corn crop may have gotten its latest-ever start this spring, but speculators’ bullish bets have lost steam in recent weeks as the weather has not been outwardly threatening for crop development.

In the week ended July 30, hedge funds and other money managers cut their net long in CBOT corn futures and options to 111,952 contracts from 153,216 contracts, according to data from the U.S. Commodity Futures Trading Commission.

This was funds’ biggest weekly net sale of corn since the beginning of April, and they have likely cut down on bullishness even further in the days since.

Trade estimates suggest that commodity funds sold about 36,500 futures contracts between Wednesday and Friday, peaking on Thursday when December corn futures finished at $4.02-1/2 per bushel, their lowest close since May 17 and 71 cents off the June 17 high.

But prices are still elevated relative to recent years. New-crop corn futures had not opened August at or above $4 per bushel since 2013.

The same cannot be said for soybeans. New-crop soybeans opened August at the lowest level since 2007, supported by record supply, the U.S.-China trade war, and reduced Chinese demand due to widespread effects of African swine fever in the hog herds.

Speculators have strengthened their bearish views toward the oilseed. Through July 30, money managers boosted their net short position in CBOT soybean futures and options to 53,572 contracts from 38,489 in the prior week.

This was funds’ most prominent selling week in soybeans since the last week of April, and they may have sold another 19,500 futures contracts over the last three sessions.

Corn and soybean futures have been under pressure because of relatively benign weather since the conclusion of the historically slow U.S. planting campaign. Unfavorable dryness has emerged in parts of the Corn Belt, but the below-average temperatures forecast through mid-August have tempered traders’ yield concerns.

Hopes for a trade deal between the United States and its top soybean buyer China plunged on Thursday after U.S. President Donald Trump vowed to impose a 10% tariff on $300 billion in Chinese goods from Sept. 1. Trump said China is moving too slowly in the negotiations, and he expressed displeasure with China not having followed up on its alleged promise to buy more U.S. agricultural goods.

Grains and oilseeds recovered on Friday after hitting two-month lows a day earlier. Like corn, CBOT September wheat futures on Thursday had also closed at the lowest mark since May 17, and November soybeans had their lowest settle since May 24.

WHEAT AND SOY PRODUCTS

Chicago wheat futures have also been sliding since June, but investors are still optimistic. In the week ended July 30, money managers increased their net long in CBOT wheat futures and options to 14,610 contracts from 11,779 contracts in the prior week.

Trade sources suggest that commodity funds were net sellers of CBOT wheat futures between Wednesday and Friday, mainly driven by weakness in the corn market.

Investors reduced their net short position in Kansas City wheat futures and options to 14,195 contracts through July 30 from 18,337 a week before. The new stance is funds’ least bearish in six months.

Money managers established a new record short in Minneapolis wheat, marking their sixth straight week of selling in hard red spring wheat. The position increased to 16,586 futures and options contracts from the previous week’s 14,410 contracts, which had been the prior record.

Funds spent all of August 2018 with a mild net long position in Minneapolis wheat, but they have been bearish ever since.

Money managers established a net long position in the CBOT oilshare as of July 30 for the first time since March. Oilshare measures soybean oil’s share of value in the soy products.

This was largely the result of funds’ buying in soybean oil, which was their largest weekly purchase in nearly six months. Through July 30, they reduced their net short in soybean oil to 24,403 futures and options contracts from 39,175 a week earlier.

Money managers also expanded their net short in soybean meal futures and options to 32,294 contracts from 25,679 in the week prior, also helping the oilshare position move into bullish territory.

Commodity funds were likely strong sellers of soybean meal and moderate sellers of soybean oil over the last three sessions.