Column: Funds Quickly Ditch Bearish Soybean Bets After Huge Selling Spree

(Reuters) – After digging well into bearish territory late in the year, speculators changed their minds about Chicago-traded soybeans in mid-December and opened the new year with a relatively neutral view on the oilseed.

In the week ended Dec. 31, hedge funds and other money managers slashed their net short in CBOT soybean futures and options to 3,159 contracts from 33,156 in the previous week, according to data published on Monday by the U.S. Commodity Futures Trading Commission.

That puts funds’ three-week soybean buying total to Dec. 31 at 109,369 contracts, the most for such a period since early March 2018. The buying streak follows a record-fast selling pace observed between November and December. (tmsnrt.rs/2Qs8kKu)

Soybean futures have retreated since setting a nearly 19-month high last week, and commodity funds are predicted to have been modest sellers in the days since.

But the overall mood in agriculture markets has recently been more optimistic than not given that China is expected to purchase more U.S. farm products when the two countries sign the Phase 1 trade deal, which is expected to happen next week in Washington.

Some market participants are skeptical of whether the purchases would be substantial given that Beijing has declined to confirm any specific amounts. But the prospects of China purchasing more U.S. agricultural goods has lent support to corn, wheat and other agricultural futures markets, in addition to soybeans.

Gains in corn and soybeans have been limited by improving weather in South America, especially in Argentina, where it had been very dry. Geopolitical tensions have also caused investors to pull back, particularly last Friday after the United States killed an Iranian general.

This week, market-watchers will be focused on Friday’s data dump from the U.S. Department of Agriculture, which will include important items such as final U.S. corn and soybean production, U.S. winter wheat seedings, and quarterly U.S. grain stocks. Analysts see the corn and soybean crops slightly smaller than USDA’s latest estimates from November.

Investors ended 2019 moderately bearish toward CBOT corn, and their overall view has not significantly changed for a couple of months. Funds held a net short in corn of 82,456 futures and options contracts as of Dec. 31, barely changed from the previous week, and they were likely modest sellers in the days since. (tmsnrt.rs/36pTnhv)

WHEAT AND SOY PRODUCTS

Money managers extended their net long in Chicago wheat futures and options through Dec. 31 to 27,270 contracts from 19,149 a week prior, and that new stance made for funds’ most bullish start to a new year since 2011. That was also speculators’ most optimistic CBOT wheat view since early July, though they have likely sold some of that position over the last three sessions. (tmsnrt.rs/2sIWanz)

Money managers flipped to a net long in Kansas City wheat futures and options of 1,284 contracts as of Dec. 31, and that is their first K.C. long in exactly a year. Funds’ net short in the week prior was 5,138 contracts. (tmsnrt.rs/37EWhyZ)

Kansas City wheat futures have fallen 1.8% over the last three sessions. Analysts expect USDA on Friday to place U.S. winter wheat seedings for the 2020 harvest at 30.664 million acres, which would be down 1.6% from a year ago and the smallest winter wheat area since 1909.

Funds remain bearish toward Minneapolis wheat futures and options with a net short of 8,416 contracts as of Dec. 31, down from 14,924 a week earlier. Money managers bought nearly 15,000 Minneapolis wheat contracts in the three weeks ended Dec. 31, which is the second-most ever in such a period.

On Dec. 24, money managers’ net long in the CBOT oilshare reached 143,766 futures and options contracts, an all-time high. They reduced that position to 137,593 contracts through Dec. 31, which is the second-largest net long on record. Oilshare measures soyoil’s share of value in the soy products. (tmsnrt.rs/36uBEWf)

The bullish oilshare position is anchored by funds’ huge long in CBOT soybean oil, which hit 119,420 futures and options contracts as of Dec. 24, just 7,000 away from the record. Money managers cut their net long in soybean oil to 112,183 contracts as of Dec. 31.

Funds’ enthusiasm for soybean oil in recent weeks has been largely fueled by a rally in Malaysian palm oil futures on a tightening of supply, though funds may have been light sellers of bean oil over the last three days. Palm oil competes with soybean oil on the global vegoil market.

Meanwhile, money managers have maintained their pessimistic views on soybean meal, expanding their net short through Dec. 31 to 25,410 futures and options contracts from 24,346 in the previous week. Buying and selling of soymeal futures were seen offsetting each other during the last three sessions.