Column: Funds steadfast in corn, soy optimism as market awaits direction – Braun

FORT COLLINS, Colo. (Reuters) – Nearby Chicago corn futures have been stuck in a range for nearly two months after their historic rally that began in August, and speculators continue to cling to their hugely bullish bets, anticipating key supply data from the U.S. government at the end of the month.

The U.S. Department of Agriculture on March 9 published its monthly supply and demand report and left domestic balance sheets for corn and soybeans unchanged from the previous month. That added to the overall stagnant mood of the market, but USDA’s March 31 U.S. grain stocks and planting intentions data is expected to make bigger waves.

In the week ended March 9, money managers lifted their net long position in CBOT corn futures and options to 356,514 contracts, up nearly 8,000 contracts from the prior week, according to data from the U.S. Commodity Futures Trading Commission (CFTC).

Other reportable traders sold corn for a seventh consecutive week, adding to the slight downturn in speculative corn optimism over the past two months. (tmsnrt.rs/2NjjylO)

In soybeans, money managers added just over 4,000 contracts to their net long, which reached 159,601 contracts as of March 9. When also considering other reportable traders, speculators’ overall soy bullishness for the time of year has fallen below that of 2014 and 2018, the latter of which was associated with severe drought-related losses in Argentina’s soybean crop. (tmsnrt.rs/3qGWUkV)

Argentina’s soybeans and corn are battling dryness today, causing harvest estimates to shrink in recent weeks. Brazil’s latest soybean crop is predicted to be sufficiently large despite delays in harvest progress, and that is raising risks for the second corn crop that is being planted very late.

Open interest in corn and soybeans remains at all-time highs for the time of year, though they have followed seasonal fluctuations over the last several months. However, soybean open interest at 1.19 million contracts as of March 9 is far more anomalous for the time of year than that for corn, which stood at 2.37 million contracts as of the same date.

The CME Group, parent of the Chicago Board of Trade, is expanding speculative position limits for agricultural futures beginning on Monday, and that follows a January ruling by CFTC. Analysts believe that this could add to market volatility, though the effect might not be immediate.

However, this will allow speculators to potentially increase their market scope, and it will be particularly important to monitor activity changes among all investor groups, including managed money and index traders.

SOY PRODUCTS AND WHEAT

Money managers cut their net long in soybean oil futures and options by about 8,500 contracts to 99,574 as of March 9, and that was despite a nearly 8% rise in most-active futures. However, other speculators were buyers of the vegoil and commercial end users were heavy buyers.

In soybean meal, money managers trimmed their net long by about 1,200 futures and options contracts through March 9. That dropped the position to 64,244 contracts, largely unchanged from the last several weeks.

Most-active soybean meal futures on Friday fell below $400 per short ton for the first time in nearly three months. That contract is also 15% off its recent high set in mid-January, though it remains at a seven-year high for the time of year.

Soybean oil futures continue to rocket higher on tightening global vegetable oil supplies and strength in crude oil. The most-active contract is up nearly 31% since the start of the year, most comparable with the early 2008 rally. On Friday, the contract hit 55.59 cents per pound, its highest since September 2012.

Money managers’ biggest relative change in the wheat contracts in the week ended March 9 came in Minneapolis wheat, as they boosted their net long by nearly 2,500 futures and options contracts to 16,590. That almost tops their all-time high from January 2017.

Concerns remain that attractive prices for oilseeds and corn will encourage American and Canadian farmers to plant significantly fewer acres of spring wheat, which is valued for its elevated protein levels.

As of March 9, money managers’ Chicago wheat net long stood at 27,576 futures and options contracts and their Kansas City net long at 47,664 contracts, both down a little more than 4,000 contracts from the prior week. That is still a very bullish K.C. view for the time of year, but it is funds’ least optimistic in three months.

The winter wheat contracts eased last week as a large storm system was set to move across the United States over the weekend, dumping significant amounts of snow and rain on parched winter wheat crops, which start to break dormancy at this time of year. Winter wheat in other parts of the world is generally in satisfactory to good condition.