Funds Sold Entire CBOT Corn Long Undetected During U.S. Government Shutdown: Braun

(Reuters) – Within the span of six weeks, commodity funds dumped bullish bets in Chicago-traded corn futures and options without the market’s knowledge.

Market participants were under the impression that speculators closed out January relatively optimistic toward the grains. However, data from the U.S. Commodity Futures Trading Commission (CFTC) confirmed otherwise on Tuesday.

Hedge funds and other money managers held a net long position in corn futures and options of 128,177 contracts as of Dec. 18, which was the last data reported by CFTC before the U.S. government entered its record-long partial shutdown just days later.

CFTC resumed publication of the Commitment of Traders (COT) data on Feb. 1, but the data release has been staggered and delayed ever since. Data for the week ended Jan. 29 was published on Tuesday, and the COT reports will not catch up to the normal speed until March 8, assuming no more interruptions.

Tuesday’s data showed that funds slashed their corn long to 6,261 futures and options contracts through Jan. 29 from 44,358 a week earlier.

Daily estimates of fund activity collected by Reuters, when aggregated from Dec. 19, would have pegged investors’ net long position to be close to 90,000 corn contracts as of Jan. 29, clearly well off the actual numbers.

This was not an unreasonable assumption, either. CBOT March corn only dropped 2 percent during the period from Dec. 19 through Jan. 29, and futures were at a four-year high for that timeframe. (tmsnrt.rs/2Ej94v6)

But analysts now predict a much different attitude. Daily estimates since Jan. 29 suggest commodity funds held a net short in corn of about 39,000 contracts through Tuesday.

Corn has recently been under pressure from big crop pegs out of South America and chart-based selling, as well as general uncertainty in the markets over the future of U.S.-China trade. The most-active contract hit two-month lows on Tuesday.

It is important to point out that the daily estimates did a much better job of predicting fund activity for soybeans and wheat during the government shutdown. Those predictions came within 11,000 contracts or less to the actual figures and had the correct sign (both bearish).

SOYBEANS AND PRODUCTS

Money managers slashed their net short in soybeans through Jan. 29 to 1,197 futures and options contracts from 22,914 a week prior.

Through Tuesday, funds are estimated to be net short in soybeans by about 4,000 contracts. If all estimates are accurate, speculators are currently the least bearish toward soybeans than any other CBOT commodity.

Trade uncertainties between the United States and its biggest soybean buyer China has both helped and hurt the soybean market in recent weeks, as the outcome is still unknown but highly anticipated. The outcome of the ongoing trade talks could greatly influence the U.S. acreage mix this spring.

As of Jan. 29, money managers flipped to a net long position in the CBOT oilshare for the first time since November 2017. Oilshare measures soyoil’s share of value in the soy products. (tmsnrt.rs/2BERZKw)

This was spurred on by funds’ third largest buying week on record in soybean oil. Through Jan. 29, money managers moved to a net long in bean oil futures and options of 3,194 contracts, axing their net short of 31,366 contracts from a week earlier.

Funds were sellers in soybean meal in the week ended Jan. 29, cutting their net long to 1,107 futures and options contracts from 6,892 in the prior week.

Through Tuesday, daily estimates suggest commodity funds are net short in both soy products by about 11,000 contracts each, making the oilshare stance neutral.

CBOT oilshare has risen fractionally since Jan. 29.

WHEAT

Money managers extended bearish bets in CBOT wheat futures and options through Jan. 29 to 22,514 contracts from 9,451 a week before.

Through Tuesday, commodity funds are pegged to have expanded their wheat short to about 36,000 contracts. This is conceivable as most CBOT wheat contracts hit all-time lows on Tuesday over technical selling and fears that U.S. wheat exports are running out of time to catch up in the 2018-19 marketing year that ends May 31.

Kansas City wheat has also been hit hard in recent days, falling to contract lows Tuesday. Through Jan. 29, funds extended their K.C. wheat net short to 7,267 futures and options contracts from 1,613 in the prior week.

Money managers did not do much with Minneapolis wheat futures and options in the week ended Jan. 29. Their net short fell slightly to 9,336 contracts from 9,829 a week earlier. Minneapolis wheat futures are also flirting with contract lows.

Reuters does not collect daily estimates of fund activity for Minneapolis or K.C. wheat, but the recent market action would suggest investors’ bearish views are fairly sound.