Where Are The Big Grain Speculators?

December 16th, 2016

By:

Category: Grains

corn-450x299(Inside Futures) – Most farmers may feel corn, soybeans and wheat trading has been too active… to the downside. However, trading grains since the lows were made in October has been slow. Volume is down and for the most part, markets have been moving sideways.

Why? What happened to the big speculators that drove grains higher last March through June? They made money and left.

When there was all the talk of La Nina early this year, trade volume was large. Day after day volume in the lead month for corn and soybeans was often over 200,000 contracts per day. Soy meal and soy oil were just as active.

Looking at volume back to the end of October, only once on November 14th did volume on soybeans go over 200,000 with most days slightly over 125,000 and a few barely breaking 75,000. The biggest volume day for January 2017 soy meal, November 25th, was 73,401 and soy oil reached 152,873 with no other days over 100,000. On November 30th March corn volume on a down day had over 273,000 contracts traded, but most days, were around 125,000.

Saying that grain markets are quiet would be an over statement. The big funds that roared late winter and spring not only closed the doors, but locked them up tight.

Another way to look at what has been happening is the Relative Strength Index, RSI. It is essentially flat. It does not get oversold and it doesn’t get overbought. As I write on December 15, 2016, the RSI on March corn is 53.85 and March 2017 soybeans is at 55.05. Both are neutral. It tells me there is no solid direction. Even soy oil that is well off of its lows and is in an uptrend has an RSI at 57.53. The RSI on soy oil tells me speculative buyers often take profits and do not hold positions for long periods of time. They buy oil, it moves higher and in a short amount of time they take profits, letting oil set back before buying it again. This has been a pattern of soy oil from the time it made a low on September 15th.

Soy meal is also off its early fall lows mostly due to feed users hedging buying needs and holding hedges, but there is very little speculating taking place. For soybeans to move higher, soy meal needs to be the lead product and soy meal is stuck in a tight trading range.

However, there is speculating in the commodity markets and it is in the stock index futures. The Dow Jones, S&P 500 and NASDAQ have all been moving higher and trade volume is large.

Until there is new big bearish, or bullish news in the grain markets and until the stock indexes run their course to the upside, large grain speculators will be on the sidelines and grains will continue to go up and down following the course set last summer.

 

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