Column: Funds Dig Deeper into Bear Territory as CBOT Selling Persists

(Reuters) – Speculators drastically ramped up their rate of selling in Chicago-traded corn, wheat and soybean futures during mid-February, though prices have skidded even further since then as the general market pessimism lingers into March.

Data from the U.S. Commodity Futures Trading Commission (CFTC) published on Friday showed that in the week ended Feb. 19, hedge funds and other money managers had one of their most prolific selling weeks of the past year. The weekly moves were especially significant given that the period had only four days due to the U.S. Presidents Day holiday.

Through Feb. 19, money managers posted their largest weekly sell in CBOT wheat futures and options since December 2017. They extended their net short to 42,718 contracts from 16,053 in the previous week.

Wheat bulls have been suffering immensely in recent weeks as CBOT May futures fell 5.7 percent in the week ended Feb. 19. Through Friday, the contract had dropped another 7 percent.

Most-active wheat futures closed the week ended March 1 down 7 percent, the sharpest weekly drop since August. Daily trade estimates collected by Reuters imply that commodity funds ended Friday’s session with a net CBOT wheat short of around 76,000 contracts, still well off April 2017’s record short of 162,327.

However, money managers were approaching record bearishness in Kansas City wheat in the week ended Feb. 19, moving to a net short of 30,786 futures and options contracts from 24,046 in the prior week. That position is the fourth-most bearish behind three weeks in December 2017, which peaked at 34,422 contracts.

Both K.C. and Chicago wheat set a new contract lows on Friday. K.C. May wheat fell 5.8 percent in the week ended Feb. 19, then dipped another 4.8 percent through Friday.

Competitive global supplies have been the primary concern for the wheat market in recent months, and the forward path will largely depend on whether global exportable supplies dry up over the next couple of months, especially in lead exporter Russia.

Investors have not nailed Minneapolis spring wheat futures as hard as their winter counterparts, cutting their net short in the week ended Feb. 19 despite the price decline through that period. Money managers moved to a net short of 5,743 futures and options contracts from 8,468 in the prior week.

Through Friday, Minneapolis May wheat was up fractionally since Feb. 19.

CORN AND BEAN DESPAIR

Money managers’ bearish corn bets exploded to 86,275 futures and options contracts through Feb. 19 from 14,693 a week earlier. That marked the fifth-largest selling week in corn within the past year, as May corn futures dropped 2 percent in the four-day period.

At Friday’s close, the May contract was down another 1.5 percent since Feb. 19, falling to the lowest levels since Sept. 20 during the session. Trade estimates place commodity funds short around 131,000 contracts of corn through Friday.

Both corn and soybean traders are watching the crops in South America, which so far are expected to finish up without a major hitch. The other major focus is the ongoing U.S.-China trade talks that will likely extend at least another couple weeks. The two leaders of the countries still need to nail down a meeting time to finalize any deal, which market participants believe could potentially lift U.S. grain and oilseed exports.

Through Feb. 19, money managers expanded their net short position in CBOT soybean futures and options to 42,810 contracts from 10,038 a week earlier. The weekly selloff is among the largest within the past year and included the addition of 25,000 gross short positions.

As of Friday, May soybeans were down fractionally from Feb. 19, but trade estimates suggest commodity funds expanded their bearish stance to around 61,000 contracts through that time frame.

The bears are also taking over in soybean meal, as money managers increased their net short through Feb. 19 to 39,959 futures and options contracts from 29,629 a week earlier. Funds were estimated to have expanded that short to around 43,000 contracts through Friday, and the record short is 54,430 contracts, set in June 2017.

Soybean oil is the only contract in which speculators maintain bullish views. Through Feb. 19, money managers trimmed their net long to 29,867 futures and options contracts from 34,459 in the previous week. Trade estimates predict funds trimmed that long to around 26,000 contracts through Friday.