Column: Funds trim bullish CBOT views as global supply concerns ease
07.12.2020 (www.reuters.com) - FORT COLLINS, Colo. (Reuters) - Speculators shed some more optimism in Chicago-traded grains and oilseeds last week as weather conditions improved for crops in South America, but the selling was much lighter than trade estimates had suggested.
In the week ended Dec. 1, money managers reduced their net long position in CBOT soybean futures and options to 194,683 contracts from 203,810 a week earlier, according to data from the U.S. Commodity Futures Trading Commission.
Analysts predicted funds had sold 23,500 soybean futures contracts during the week, which contained only four trading days due to the Thanksgiving holiday. However, the resulting position is investors’ least bullish in more than two months.
In corn, money managers cut their net long to 270,633 futures and options contracts from 287,599 in the prior week, though the selling had been estimated at 42,000 contracts.
Money managers’ net long positions in CBOT soybean oil and meal futures and options as of Dec. 1 were 104,715 and 70,386 contracts, representing declines of less than 1,000 contracts on the week. The selling likely continued late last week for soymeal, but oil futures surged nearly 4% over the last three sessions on strength in global vegoils.
CBOT corn and soybean futures are trading at seven-year highs for the time of year and were basically unchanged through the last three sessions. However, the pressure has been downward as parched crops in South America have received some moisture after a historically dry start.
The growing seasons in Brazil and Argentina are still in the earlier stages, and more rain will likely be needed to ensure strong harvests. Analysts polled by Reuters on Friday think that the Brazilian bean crop is already on its way to bumper status with a 132.25 million-tonne average estimate.
Export demand for U.S. corn remains elevated, but soybean sales have notably dropped in recent weeks with the surge in prices. Market analysts continue to debate whether China plans to book significant amounts of U.S. soybeans and corn going forward, or if buyers can wait for South American supply.
WHEAT
Chicago wheat futures continue to trade at six-year highs for the time of year, though investors ditched optimism as of Dec. 1, establishing a net short of 4,397 futures and options contracts versus a net long of 15,299 a week prior. That move was evenly comprised of new shorts and a reduction in longs.
Money managers have not maintained bearish CBOT wheat views for more than two months since June 2019. Long bearish streaks have historically been much more prominent for Chicago wheat than bullish ones.
Most-active CBOT wheat futures on Tuesday hit a two-month low, then rebounded in the next two sessions before falling 1.5% on Friday. Bigger crops in Canada and Australia, better crop conditions in Europe and more exportable Russian supplies than expected have added pressure to wheat prices.
Funds trimmed their net long in Kansas City wheat futures and options to 44,506 contracts through Dec. 1 from 48,421 a week earlier. They also reduced their net long in Minneapolis wheat to 4,755 futures and options contracts from 5,854, their fifth consecutive selling week.
Money manager’s bullish stance on K.C. wheat versus Chicago has surged in recent weeks after spending most of the last two years uncharacteristically in bearish territory. In the four weeks ended Dec. 1, the net long went from basically flat to 48,903 futures and options contracts, the largest in just over two years.
Prior to October 2018, it was unusual for K.C. wheat to trade at a discount to Chicago for long periods of time, but that has been the case ever since. However, that spread narrowed to about minus 32 cents per bushel in the most-active months late last week. K.C. wheat was about a dollar cheaper than Chicago a year ago.
The opinions expressed here are those of the author, a market analyst for Reuters.
Editing by Diane Craft