Column: Funds Keep Bearish Corn, Soy Views While Awaiting Cues on Direction

(Reuters) – Speculators eased their bearish views on corn and soybeans last week, but their willingness to place any optimistic bets on the Chicago-traded commodities is at multi-year lows.

Corn futures have traded sideways for the last couple of weeks, with the December contract settling at $3.71-1/2 per bushel on Friday. That is a four-year high for the end of September.

In the week ended Sept. 24, hedge funds and other money managers trimmed their net short position in CBOT corn futures and options to 159,890 contracts from 170,626 in the previous week, according to data from the U.S. Commodity Futures Trading Commission.

The number of outright long corn positions at 159,766 is the lightest since August 2016. The number of shorts is closer to average for the time of year, but below last year.

Some market participants hold on to the idea that the U.S. corn harvest will come in much lower than expected because of the record slow planting pace. On the other hand, demand for the U.S. product has been extremely slow, keeping domestic stockpiles at comfortable levels.

U.S. soybean inventory is safely record-high, but a sharply lower U.S. harvest will test supplies over the next year, especially if the crop shrinks further or Chinese demand rebounds.

Through Sept. 24, money managers reduced their soybean short to 41,688 futures and options contracts from 48,181 in the prior week. Funds have not been bullish toward the oilseed by more than 6,000 contracts since June 2018.

The number of outright soybean longs at 77,928 is the lowest for the time of year since 2015, and the number of shorts is slightly above average but below a year ago. Funds have not held more than 100,000 outright soybean longs since early June 2018.

Soybean futures have drifted slightly lower since mid-month, and commodity funds were predicted to have been net sellers of both soybeans and corn between Wednesday and Friday.

This comes even though the U.S. Department of Agriculture confirmed soybean sales to China on all three days, with a total amount of 964,000 tonnes. Current U.S. soybean sales to the top buyer are above the year-ago levels, but well below the volumes observed in other previous years.

Word late last week that China may be planning to buy even more U.S. soybeans in the coming weeks ahead of the higher-level trade talks between the two countries also failed to generate optimism. Talks are set to resume in Washington on Oct. 10.

The market will also be watching on Monday for another round of USDA reports, which will give final 2018-19 ending stocks for U.S. corn and soybeans and final 2019-20 production for U.S. wheat. Traders see corn and bean stocks slightly lower than USDA’s previous estimates.

SOY PRODUCTS AND WHEAT

Speculators cut down on their bearish views in CBOT soybean meal in the week ended Sept. 24, reducing their net short to 47,983 futures and options contracts from 54,751 in the previous week, which was an all-time high.

At the same time, funds expanded their net long in CBOT soybean oil futures and options to 22,399 contracts from 19,931 in the previous week. December futures have fallen 5% since their mid-month surge, which was largely driven by the spike in crude oil prices.

Trade estimates suggest commodity funds were straight sellers in the soy products over the last three sessions.

Similar to corn prices, Chicago wheat futures have not adjusted significantly in the past couple of weeks, though as of Friday, the December contract had risen 5% since the beginning of the month. That included a 1% jump over the last three sessions, and funds were presumed to have been net buyers of wheat futures over the period.

In the week ended Sept. 24, money managers expanded their net short in Chicago wheat futures and options to 18,779 contracts from 12,577 in the previous week, though the new stance remains weaker than in most previous years.

After several weeks of expanding their record short in Minneapolis wheat futures and options, money managers finally cut that position to 19,529 contracts through Sept. 24 from 23,071 in the prior week. That is still very bearish relative to history, but it is funds’ least pessimistic view since mid-August.

The finish to the U.S. spring wheat harvest has moved very slowly as excessive rainfall has plagued the Northern Plains. As of Friday, an early-season snow storm was expected to further stall harvests in Montana and Canada.

December spring wheat futures have risen 10% or 50 cents per bushel since the beginning of September.

Funds barely changed their views on Kansas City wheat futures and options through Sept. 24, shaving their net short to 36,197 contracts from 37,571 a week before.