Column: Funds Sell More CBOT Corn and Likely Erase Bullish Soybean Bets

(Reuters) – Uncertainty still lingers over the exact size of the U.S. corn and soybean harvests and South America is in the early stages of its growing season, but speculators appear comfortable with global supply levels as they continued selling Chicago-trade corn and soybeans last week.

In the week ended Nov. 19, hedge funds and other money managers increased their net short in CBOT corn futures and options to 123,530 contracts from 110,921 a week prior, according to data published Friday by the U.S. Commodity Futures Trading Commission.

Funds’ latest corn position is composed of 135,595 outright long contracts, the fewest for any week since April 2009. The number of outright shorts is relatively average compared with history.

Many market participants maintain that the relatively strong U.S. cash markets are suggestive of a lighter corn supply than is predicted by the government. Investors seem less worried, especially since demand for the U.S. product remains slow.

Trade sources suggest commodity funds sold about 12,000 corn futures contracts between Wednesday and Friday. They were also predicted to have sold 24,000 soybean futures, which if true, would make them net short heading into the new week.

Through Nov. 19, money managers cut their net long in CBOT soybean futures and options to 18,452 contracts from 31,050 in the previous week. Funds’ latest bullish bean stint began in early October, their first since the beginning of the trade war between the United States and China in June 2018.

Most-active soybean futures on Friday ended at $8.97 per bushel, their first close below $9 since Sept. 27.

The unresolved trade war between the United States and China has heavily influenced the recent soybean downturn. A “phase one” trade deal was supposed to be signed earlier this month, but both sides still seem to disagree over the terms. Sources close to the talks told Reuters last week that the first phase of a deal may not be reached until next year.

The weather for soybean crops in South America has not been overly threatening, and this has also weighed on futures. Consultancy ARC Mercosul said Friday that 77.3% of the Brazilian crop is sown, behind the average of 80.5%. Some farmers there are concerned about how this will impact second corn plantings.

In Argentina, soybean and corn planting was 36% and 46% complete, respectively, as of Thursday. Those paces are within a couple points of average.

MEAL, OIL, HOGS

Money managers have been pessimistic toward CBOT soybean meal futures and options for most of this year. In the week ended Nov. 19, they cut their net short by nearly 4,000 contracts from the previous week to 19,560 contracts, funds’ least bearish view since early July.

Conversely, money managers have taken a strongly bullish stance in soybean oil futures and options amid a tightening in global vegetable oil supplies. Through Nov. 19, they reduced their net long position to 82,356 contracts from 88,097 a week prior. The largest-ever long position was recorded in late 2016 at 126,543 contracts.

Index traders established a record long in soybean oil futures and options in the week ended Nov. 12 of 134,504 contracts, though they reduced that to 132,298 in the latest week. The number of outright longs is just about at an all-time high, but the number of index shorts is also well above historical averages.

Commodity funds were seen as net sellers of soybean meal and net buyers of soybean oil between Wednesday and Friday.

Speculators’ enthusiasm for lean hogs, traded on the Chicago Mercantile Exchange, has been waning despite the severe outbreak of African swine fever in China, the world’s top pork producer and consumer. Through Nov. 19, money managers cut their net long to 6,007 futures and options contracts from 13,248 a week earlier.

Funds’ new stance in hogs is the least optimistic since March, and there is a chance that optimism is gone altogether heading into the new week. In the last three sessions, February futures fell 2.8%.

CHICAGO WHEAT ON TOP

Investors have been relatively neutral toward Chicago-traded wheat futures and options for almost a month, and that trend likely continued through the end of last week. Money managers flipped to a net short position of 2,049 contracts through Nov. 19 versus a net long of 391 contracts a week earlier.

Analysts suggest funds were net buyers of Chicago wheat futures over the last three sessions. Futures rose Friday on technical buying and concerns over a drop in U.S. wheat plantings for harvest in 2020, according to traders.

In Kansas City wheat futures and options, funds extended their net short through Nov. 19 to 26,119 contracts from 22,689 a week before. Compared with the Chicago contract, Kansas City futures have been trading at a discount of more than 70 cents per bushel in the front month since early August, an unheard-of level prior to this year.

Money managers also increased their net short in Minneapolis wheat futures and options to 13,988 contracts through Nov. 19 from 11,570 a week prior. Nearby futures on Friday were trading at the lowest levels for the month of November since 2006, settling at $4.92-3/4 per bushel.

Last week, Minneapolis wheat futures flipped to a rare discount versus Chicago. Friday’s close placed the front-month Minneapolis contract 22-1/2 cents per bushel below the Chicago contract, the largest discount since Oct. 2, 2007.

Prior to last Monday, front-month Minneapolis wheat futures settled at a discount to Chicago in only 10 other sessions since Oct. 2, 2007.