Speculator enthusiasm waning for grains, oilseeds: Braun
A French farmer, taken with a drone, harvests wheat in his field in Arleux, France, July 20, 2017.
CHICAGO (Reuters) - Despite some analyst predictions, speculators were not confident in a bullish scenario for corn and soybeans ahead of last week’s reports from the U.S. Department of Agriculture, but they were uncertain enough to refrain from heavy selling.
Last Thursday, USDA updated its monthly supply, demand, and production outlooks, which included agency’s first objective assessment of U.S. corn and soybean yields.
Industry analysts had expected yields to decline from USDA’s long-term trends based on recent low crop ratings, but neither of the average analyst predictions would have shockingly cut the plentiful domestic supply.
As such, speculators reduced their net long positions in both Chicago-traded corn and soybean futures and options in the week ended Aug. 8 – just two days before the report – according to data from the U.S. Commodity Futures Trading Commission.
However, it was mostly the result of exiting longs rather than new shorts, particularly in corn. This suggested that while they did not expect a bullish report, they were not confident it would be bearish -- but it was.
USDA placed U.S. corn yield at 169.5 bushels per acre and soybean yield at 49.4 bpa, both of which comfortably topped even the highest analyst prediction.
New-crop futures fell 3 percent on Thursday, with December corn futures hitting the lowest level since Sept. 30, and November soybeans the lowest since June 30.
Wheat got a piece of it too as the drought-troubled U.S. spring wheat crop estimate came in higher than the trade expected. World supply got a boost as USDA increased the Russian, Ukrainian, and Kazakh wheat harvest volumes by a combined 9 million tonnes, and CBOT September wheat ended the day down 4 percent.
Despite Thursday marking one of the biggest sell-offs in CBOT futures and options in nearly a month, speculators clearly saw this as an opportunity in corn and soybeans on Friday as prices firmed and funds were net buyers.
But losses for the wheat contracts continued Friday led by MGEX spring wheat. Investors felt comfortable liquidating bullish spring wheat positions after USDA’s larger crop peg, especially given that the U.S. harvest was 24 percent complete as of Aug. 6.
ENTHUSIASM DROP ACROSS THE BOARD
In the week ended Aug. 8, money managers reduced enthusiasm in futures and options across all seven Chicago- and Minneapolis-traded grain and oilseed contracts. Chicago wheat joined soybean meal as the only two contracts in which funds hold a bearish view.
Funds cut their net long in corn futures and options to 67,073 contracts from 84,644 the week prior, but only about 12 percent of this move was the result of new shorts in the market. (reut.rs/2fzgkZZ)
This same idea rang true for soybeans, but with less hesitation. Funds reduced their bullish stance to 12,913 futures and options contracts from 39,795 in the previous week, and new shorts accounted for roughly 30 percent of that move. (reut.rs/2fzgaSn)
In soybean oil, last week marked the first time in eight weeks that spec confidence in the vegoil did not expand. Through Aug. 8, money managers trimmed their net long to 65,015 futures and options contracts from 67,913 the week prior, and the position remains specs’ most bullish on the vegoil for this time of year. (reut.rs/2fz3zPh)
Funds extended their bearish bets in soybean meal to 14,357 futures and options contracts from 7,414 the week before. Speculators have not held bullish views on soybean meal since mid-April. (reut.rs/2fzh1m3)
In the wheat market, speculators have crossed over into bear territory in Chicago wheat futures and options after five straight weeks on the bull side. Through Aug. 8, funds were net short 14,101 contracts compared with their net long of 12,190 contracts in the previous week. (reut.rs/2hRKrg5)
However, money managers are still hesitant to drop long positions in K.C. wheat. They reduced their net long to 48,935 futures and options contracts from 54,187 in the week prior, and this was almost entirely the result of new shorts. (reut.rs/2hSiAMX)
For the third straight week, funds maintained a virtually unchanged stance in Minneapolis wheat, though that has likely changed in the days since. Through Aug. 8, funds slightly shaved their net long to 10,708 futures and options contracts from 10,808 the previous week. (reut.rs/2hRFweY)
(The opinions expressed here are those of the author, a market analyst for Reuters)