Column-Funds Slash Bearish Soy Bets on U.S.-China Trade Hopes, but Corn Selling Persists -Braun

(London South East) – Speculators were net sellers of Chicago-traded corn last week for the ninth week in a row, though they drastically reduced bearishness in soybeans on U.S.-China trade hopes. That optimism soured somewhat on Friday, but the ongoing trade talks and the finishing of U.S. corn and soybean crops continue to be primary focal points in grain and oilseed markets.

In the week ended Sept. 17, hedge funds and other money managers increased their net short position in CBOT corn futures and options to 170,626 contracts from 136,399 a week prior, according to data from the U.S. Commodity Futures Trading Commission. (https://tmsnrt.rs/30bmSUp)

The period included the U.S. Department of Agriculture’s cut to U.S. corn production, although the reduction was smaller than expected. Selling still dominated the week despite futures rising 1.8% over the five-day span.

Investors’ recent corn outlook is just about the most bearish ever for the date, but trade sources estimate that funds were light buyers of corn futures late last week. Warm September weather across the U.S. Corn Belt has been very favorable for late-planted crops, but many traders still see overall production shrinking.

December corn futures finished at $3.70-3/4 per bushel, which is comfortably the highest price for the date in four years.

Money managers slashed bearish bets in CBOT soybean futures and options through Sept. 17 to 48,181 contracts from 91,737 a week earlier. That was the most soybean contracts funds have bought in one week since December. (https://tmsnrt.rs/30BbGwu)

Traders were feeling friendlier toward soybeans after USDA cut U.S. production on Sept. 12, which was accompanied by a larger-than-expected reduction to year-end supply. But the bigger boost came from China’s 720,000-tonne purchase of U.S. soybeans leading up to the next round of trade talks between the two countries.

Deputy-level trade negotiations resumed face-to-face last week for the first time in almost two months, and this was aimed at paving the path for higher-level talks between U.S. and Chinese officials next month. Agricultural trade was a primary topic of last week’s talks, and the market was optimistic that progress was being made, especially considering the goodwill purchases.

But those hopes were dashed late in trading on Friday as it was confirmed that Chinese officials cancelled visits to U.S. farms planned for this week. CBOT and CME futures slumped on the news, and Wall Street’s main indexes dropped sharply as a U.S.-China trade deal suddenly appeared farther from reach.

Commodity funds were seen as net sellers of soybean futures over the last three sessions.

SOY PRODUCTS AND WHEAT

In the week ended Sept. 17, money managers reversed their stance in CBOT soybean oil futures and options, establishing a net long of 19,931 contracts versus a net short of 19,106 in the previous week. The move was funds’ second largest weekly purchase of bean oil on record behind the week ended Aug. 13.

Brent crude oil, the international benchmark for oil, surged nearly 15% last Monday after an attack on Saudi Arabian crude facilities, and this also boosted soybean oil futures. Gains in oil are often linked to agricultural markets because crops are used to make ethanol and biodiesel fuel.

CBOT oilshare, which measures soyoil’s share of value in the soy products, touched 0.34 last week, its highest in 20 months.

Investors have very different feelings about soybean meal, however, as they extended their net short through Sept. 17 to a record 54,751 futures and options contracts from 47,606 a week earlier. The previous record short was 54,430 contracts set in the week ended June 27, 2017.

Soybean meal futures are at their lowest September levels since 2010, with the December contract finishing at $295 per short ton on Friday. U.S. soybean processors had their biggest August on record, crushing 168.085 million bushels of the oilseed, and that was the eighth month within the last year where crush reached a new monthly high.

Trade estimates suggest commodity funds were net sellers of soybean meal futures over the last three sessions but flat in bean oil.

Global demand has been strong in the wheat market, but supplies are also ample. Money managers trimmed their net short in CBOT wheat futures and options to 12,577 contracts through Sept. 17 from 14,389 in the previous week. They are thought to have been light sellers of CBOT wheat futures over the last three sessions. (https://tmsnrt.rs/30crObt)

Money managers also shaved their net short in Kansas City wheat futures and options through Sept. 17 to 37,571 contracts from 41,566 in the previous week. Relative to the same date in previous years, funds are particularly bearish toward K.C. wheat but less so toward Chicago. (https://tmsnrt.rs/30wRtb3)

Funds pushed to yet another record short in Minneapolis wheat futures and options through Sept. 17, despite a light rise in prices through the period. The net short of 23,071 contracts is up from 22,805 last week, and it is funds’ ninth new record short in spring wheat in the last 10 weeks.

December spring wheat futures rose 3.5% over the last three sessions, the contract’s largest three-day rise since May. Excessive rains in the northern U.S. Plains and Canadian Prairies have hurt grain quality and slowed harvest pace.