(Agrimoney) – It was another rollercoaster day in the grains, with sharp volatility and hefty volumes, as fund appears to be setting the agenda.
After a rapid sell-off on Friday, grain futures were initially down on Monday, before jumping higher, despite some ostensibly bearish data on the scale of hedge fund buying last week.
“Soybeans are leading the way higher in grains today as the funds continue to dictate trading activity,” said Jenifer Webster, at CHS Hedging.
“Corn and wheat are gaining strength from soybeans,” she said.
“There was some expectation that fund buying would surface again early this week and that has happened,” said Darrell Holaday, at Country Futures.
Markets searching for a clue
Tregg Cronin, at Halo Commodities, said market players are “still looking for clues to the sharp rally and the equally swift selloff,” last week.
“While the rush of fund money back into our space was certainly a large driver, there were also clues from trade in China which may have helped exacerbate the rally and decline,” he said.
Mr Cronin saw a “large scale exodus” of fund money from ag futures as unlikely, “given the profits left in many positions, not to mention volatility related to the growing season is just getting ramped up”.
“It would surprise most if the funds decided to abandon positions so quickly after building them throughout March and April,” Mr Cronin said.
Hedge fund buying
Hedge funds ramped up their bullish bets in grains by the fastest pace in six years last week, data from the US Commodity Futures Trading Commission shows.
In the week to last Tuesday, managed money boosted its bullish bets in grain by 182,110 lots, the fastest one-week rise since the middle of 2010, leaving speculators net-long on grains for the first time since October last year.
Hedge funds lifted their net long in soybeans to the highest level for over two years, and slashed bearish bets in corn at the fastest pace since the start of 2015.
Kim Rugel at Benson Quinn Commodities, said the corn and soybean numbers were “probably bearish”
Rains in Brazil
And news from South America was, on the face of it, bearish as well.
In Brazil, where dry weather has been threatening to reduce yields of safrinha, or second crop, corn, rains are expected.
“The hot and dry weather will be ending shortly, with rains spreading into southern portion of the corn belt today and reaching the rest of the safrinha corn areas tomorrow,” Kyle Tapley, at MDA Weather Services, said.
But Mr Tapley warned noted that although the rains will ease dryness “slightly,” they will not be enough to “completely replenish soil moisture supplies”.
Dry Argentine weather
In Argentina, which has seen very heavy rain threatening the soybean crop, much drier weather is forecast.
After a few scattered showers on Monday, “dry weather is expected for the rest of the week, which will finally begin to ease wetness concerns and allow corn and soybean harvesting to make better progress,” Mr Tapley said.
“The dry weather should continue into the 6-10 day period, which should further improve conditions for harvesting, he said.
But there was some fundamental support for the grain, US export inspections for corn last week came in at a better-than-expected 1.1m tonnes.
July corn futures finished up 2.2%, at $3.81 ¾ a bushel, after touching a high of $3.89 ½, with volumes very heavy.
Very low exports
But soybean export inspections were very low, although in line with expectations, at around 279,000 tonnes, the smallest number so far this year.
And soybean supplies from Brazil are picking up, after hitting 7.5m tones this month.
Still, July soybeans finished up 1.3%, at $10.09 ¾ a bushel, after touching highs of 10.29 ¾ a bushel.
Wheat data supportive
Speculators trimmed their net short in wheat by a smaller amount, which Ms Rugel said “should be supportive”.
Wheat export inspections were in line with expectation, at about 406,000 tonnes.
The USDA’s Moscow bureau saw the wheat crop at 58.0m tonnes, down 3.0m tones year on year. , although still above the 5-year average.
July Chicago wheat futures finished up 0.7%, at $4.77 ¾ a bushel.
Hedge fund data surprises, again
The CFTC data proved supportive for sugar futures, as it showed that speculators had increased their net long positions by less than expected over the week to last Tuesday.
A sharp spike in prices on Friday 15 had led markets to assume had many expecting a sharp ramp-up in long bets, bringing the commodity dangerously close to oversold territory.
“The Commitment of Traders report has surprised the market once again but may just prove that many Funds are holding a core long position which will not necessarily move much despite the occasional vagaries of flat price volatility,” said Nick Penney, senior trader at Sucden Financial.
July raw sugar settled up 2.7%, at 15.89 cents a pound, after reaching up to 15.95 cents.
August white sugar settled up 1.6%, at $460.40 a tonne.
