Funds Heading for Record-Long Bets in CBOT Oilshare

(Reuters) –  Speculators’ bullish position in the CBOT oilshare, measuring soyoil’s share of value in soy products, soared to a 10-month high in the week ended Aug. 29 and it may be approaching record levels in the coming days and weeks.

At the same time, money managers have extended their bearish bets in Chicago-traded corn, wheat, and soybean futures, but this trend has likely eased into the start of September.

The same story has been at the forefront for several weeks now: Large supplies and no threats to the fundamentals in the foreseeable future have kept a lid on grain and oilseed futures. Even recent talk of an early frost that could disrupt U.S. corn and soybean crops has not stirred speculators.

Continued expectations for a sufficiently large U.S. corn harvest sent CBOT December corn futures to new contract lows for seven sessions in a row through last Thursday. But as the contract moved deeper into oversold territory it finally got a hefty bounce, and prices notched their biggest daily gain in nearly two years at Thursday’s close.

Wheat futures also got in on the end-of-month technical buying, and the benchmark December CBOT and K.C. contracts ended the week higher for the first time in eight weeks.

Minneapolis wheat struggled though, especially late in the week, as heavy deliveries against the September contract and the unwinding of long Minneapolis/short Chicago spread positions sent prices lower.

The U.S. soybean harvest is expected to surpass last year’s record, but November soybean futures made a three-week high on Friday led by soybean oil, which hit nearly eight-month highs in the December contract.

The U.S. Department of Agriculture reported that crude soyoil stocks in August fell 10 percent from the previous month, and this had traders circling back to the news of U.S. tariffs on Argentine biodiesel imports from the week earlier and the implications for soybean demand.

Robust demand for U.S. soybeans, including strong export sales and inspections, continues to lend price support and limit speculators’ worries over burdensome supply. Recent demand has not been all that bad for corn, but the longer-term outlook on usage may not support a significant enough drawdown on the decades-large stockpile.

On Friday, several industry analysts revised their U.S. corn and soybean harvest outlooks upward, echoing USDA’s larger crop ideas from earlier last month, which turned corn futures lower.

Since last Wednesday, commodity funds were buyers of soybeans, wheat, and soybean oil. The trend was somewhat neutral on corn and soybean meal, as Thursday’s corn buying spree was wedged between two healthy selling days.

OILSHARE OFFSIDES

One of the most notable moves by money managers in the week ended Aug. 29 was the significant extension of the long oilshare futures and options position.

According to data from the U.S. Commodity Futures Trading Commission, the spread between the funds’ soybean oil long and soybean meal short has exceeded 100,000 contracts for only the 11th week in history.

Funds mildly cut their soybean meal short but drastically lengthened their soyoil long in the week ended Aug. 29, and the spread stands at 103,023 futures and options contracts. The record is 128,936 contracts on April 5, 2016, which could be threatened given last week’s buying and selling activity.

Money managers continued to sell soybean futures and options but at a reduced rate compared to recent weeks. As of Aug. 29, they were net short 28,367 contracts, a modest increase from 23,394 in the week prior.

Selling was no problem for funds in corn, as they beefed up their bearish stance to 64,945 futures and options contracts from 17,073 in the week prior. This is the second-most bearish close to August for funds on corn behind 2016 – though last year’s net short was nearly 100,000 contracts larger.

In Chicago wheat, money managers extended their net short to 77,529 futures and options contracts from 66,751 in the week earlier. This was mostly on the addition of shorts but there were buyers in the soft red winter wheat market for the first time in seven weeks.

Funds reduced their net long position in K.C. wheat for the 7th consecutive week to 18,060 futures and options contracts compared with 23,770 in the week prior. Similar to the previous week, speculators were both buyers and sellers of hard red winter wheat.

Speculators’ sentiment in Minneapolis wheat was hardly changed on the week, as they trimmed their bullish stance on the hard red spring wheat to 8,122 futures and options contracts from 8,724 in the previous week.