Funds Sold CBOT Grains Last Week Despite Short-Covering Rally

(Reuters) – Speculators extended bearish bets in Chicago-traded grain futures and options in the week ended Oct. 24 despite a round of short-covering late in the period that lifted prices.

Heavy fund selling at the end of the previous week spurred a respectable rally in CBOT grains on Oct. 23, sending benchmark December corn futures up 2 percent, the largest single-day gain since Aug. 31. December wheat added 2.5 percent on the same day, its strongest daily gain since July 10.

But ample supplies worldwide keep on getting larger and as a result, speculators were ultimately net sellers in the grains last week even with Monday’s rally.

Through Oct. 24, money managers extended their net short position in CBOT corn futures and options to 174,394 contracts from 170,684 in the prior week, according to data from the U.S. Commodity Futures Trading Commission.

Funds also mildly upped bearish bets in Chicago wheat in the same period to 83,965 futures and options contracts from 77,692 in the previous week.

These large short positions in corn and wheat may have ballooned further since, as commodity funds were straight sellers of both grains in the last three sessions, according to trade sources.

In corn, speculators have essentially reached the historical high for short positions for the time of year. In Chicago wheat, the fund short is second only to last year’s position.

Short-covering rallies are always possible when speculators build up such large short positions. Those rallies can gain additional momentum whenever fundamental support is also present, but this can be hard to come by in such a well-supplied market.

The earliest chance for that support could be rooted in delays to the U.S. corn harvest, which was 38 percent complete as of Oct. 22, some 21 points behind the five-year average. Traders might start to doubt crop yields and/or quality if significant progress has not been made in the latest week, but large stocks should keep those doubts in check.

Money managers also continued to sell futures and options in the other wheat contracts last week. They lengthened their net short in K.C. wheat to 10,840 contracts from 4,662 in the previous week.

Bullish Minneapolis wheat bets are still alive, but funds last week made their largest position cut in over two months, reducing the net long to 2,627 futures and options contracts from 4,651 a week prior.

OILSEED OPTIMISM?

Money managers continue to hold long positions across the oilseeds – including CBOT soybeans, soybean oil and soybean meal – although overall enthusiasm declined in the week ended Oct. 24.

Still, the disparity in the attitude of speculators toward CBOT oilseeds on the one hand and grains on the other widened further last week, with the degree to which funds now favor oilseeds over grains near historically high levels. Still, the disparity in spec attitude between CBOT oilseeds and

This gap has may have widened further in the days since, led by fund buying in soybean oil as the December contract gained 2 percent last week.

Technical buying lifted November soybeans on Friday after reaching a two-week low late in the week. But trade sources suggested that funds were net sellers of soybeans late last week, partially driven by Thursday’s selloff in soymeal futures.

Although many market participants consider global soybean demand to be strong, speculators are cautiously bullish on the oilseed, reducing optimism in the latest week.

Through Oct. 24, money managers cut their net long in CBOT soybean futures and options to 49,246 contracts from 68,168 in the prior week.

Funds also scaled back bullish bets in soymeal to 17,679 futures and options contracts from 21,127 a week earlier, and the net long has likely shrunk in the days since.

But speculators seem to have a renewed interest in soyoil after a record selloff to open October. In the latest week, money managers extended their net long in soybean oil futures and options to 35,613 contracts from 24,925 in the previous week.

As such, speculator’s bullish stance on the CBOT oilshare – which measures soyoil’s share of value in soybean products – increased for the first time since early September to 17,934 futures and options contracts from 3,798 in the prior week.

The oilshare long likely expanded again late last week with the fund selling in soymeal and additional buying in soyoil.