Column: Funds’ Record Corn-Buying Streak Grinds to a Halt on Better U.S. Weather

(Reuters) – Speculators have been on a record buying streak in Chicago-traded corn in recent weeks, but that likely stalled out late last week as many U.S. farmers got a break in the rains to continue the historically slow planting effort.

In the week ended June 4, hedge funds and other money managers switched to a net long position in CBOT corn futures and options of 87,243 contracts from their net short of 20,736 a week earlier, according to data from the U.S. Commodity Futures Trading Commission.

In the three weeks to June 4, funds bought a net 370,161 corn futures and options contracts. That is easily a record for a three-week stretch, topping the old record of 297,269 contracts in the period ended July 14, 2015.

Short-covering was in the driver’s seat the whole time. Money managers reduced their outright short positions in corn by 323,971 contracts in the three weeks to June 4, which also comfortably set a record.

Significantly fewer new longs were willing to jump in, however, as only 46,190 outright corn longs were added in the three-week period.

Money managers’ total amount of outright long positions is not aggressive, either. As of June 4, funds held 240,884 total long contracts, fewer than during most of January and significantly lower than the 330,382 contracts in the same week a year ago.

The sharp reduction in outright corn shorts and the relatively low amount of them that remain in the market compared with recent history reduces the opportunity for futures rallies driven by the exiting of short positions.

This likely contributed to the weakening in prices later last week along with drier forecasts for the coming days in the U.S. Corn Belt that could facilitate more corn planting should farmers choose to proceed at this late stage. Sluggish demand for U.S. corn and poor export sales also weighed on the futures market.

Last week was the first in a month that CBOT corn futures ended lower on the week, and trade estimates suggest commodity funds sold a net 33,000 corn futures contracts between Wednesday and Friday.

Producers also set records in the three weeks ended June 4, selling a net 346,220 corn futures and options contracts, considerably larger than the previous high of 265,748 back in July 2015.

WHEAT AND SOYBEANS

Short-covering and strength in corn has recently driven up futures prices for wheat. U.S. quality concerns following heavy rains have also been lingering, and late last week, production concerns for some major exporters such as Russia, Australia, and Canada started to brew.

In the week ended June 4, money managers reduced their net short in CBOT wheat futures and options to 13,348 contracts from 23,780 in the previous week. That is significantly less bearish than their net short of 82,146 contracts just four weeks earlier.

In Kansas City wheat futures and options, funds slashed their net short to 24,080 contracts from 39,469 a week earlier. Speculators’ bearish bets in K.C. wheat had been at record levels since late February, which also led to the recent short-covering.

Through June 4, money managers cut their net short in Minneapolis wheat futures and options to 7,874 contracts from the previous week’s 12,280, a level which funds have been at for roughly six weeks.

Soybean futures had recently rallied on the U.S. planting delays, but investors are still very bearish on the oilseed given ample global supplies, especially in the United States. Like corn, soybean futures last week also had their first weekly setback in a month.

In the week ended June 4, money managers reduced their net short in CBOT soybean futures and options to 93,356 contracts from 129,994 a week earlier. This was funds’ largest weekly net purchase of soybean contracts in six months.

Funds flipped to a bullish stance in soybean meal through June 4 of 2,163 futures and options contracts. That compares with a net short of 20,361 in the prior week. They also cut bearish bets in soybean oil futures and options to 55,811 contracts from 62,224.

Despite net buying across the board through Tuesday, commodity funds were pegged as net sellers of CBOT wheat, soybeans, soybean meal and soybean oil between Wednesday and Friday.