May 11, 2020 / 9:11 AM / 2 months ago

Column: Funds' bearishness in CBOT corn reaches a one-year high

FORT COLLINS, Colo. (Reuters) - Speculators have grown the most pessimistic toward Chicago-traded corn that they have been in a year, even as futures prices have generally trended upward over the last two weeks.

Corn rests on the ground on Hodgen Farm in Roachdale, Indiana, U.S. October 29, 2019. REUTERS/Bryan Woolston/File Photo

Money managers boosted their net short position in CBOT corn futures and options to 190,152 contracts in the week ended May 5, according to data from the U.S. Commodity Futures Trading Commission.

That was up from 160,975 contracts in the previous week, and it is funds’ most bearish corn view since mid-May last year. The year-ago short was much stronger at around 282,000 contracts, and open interest was 15% larger than present levels.

The latest corn move resulted mostly from the addition of new shorts, but longs retreated as well. As of May 5, the managed money corn position contained 117,954 gross longs, the fewest since April 2009.

Most-active CBOT corn futures rose 1.3% over the last three sessions, and trade sources believe commodity funds trimmed their net short during that period.

Traders are preparing for the U.S. government on Tuesday to predict the heaviest U.S. corn supplies in more than 30 years for the next marketing year that begins on Sept. 1. Ending stocks for 2020-21 are seen rising 52% on the year to 3.389 billion bushels (86 million tonnes).

Domestic ethanol production has risen notably from the month-ago low, and export demand for U.S. corn has improved in recent weeks. But American farmers have gotten a quick start on planting, and many analysts think that may keep acres near 97 million.

China made a large purchase of U.S. corn last week, which helped ease some of the market fears about a resurgence of trade tensions between the two countries.

Early on Friday, top trade officials from both countries pledged to press ahead with implementing the Phase 1 trade deal, despite the United States’ displeasure with China’s handling of the coronavirus outbreak.

SOYBEANS AND WHEAT

China also bought some American soybeans last week, though total U.S. sales are still critically short of USDA’s full-year target. Analysts are hoping that China will make a comeback to the U.S. market as the two sides continue with trade progress.

However, China is already being supplied with massive amounts of soybeans from Brazil. The South American country shipped 24.7 million tonnes of beans to China in the first four months of 2020, about as much as the total amount shipped there by the United States since February 2019.

Money managers are still slightly bullish toward the oilseed. Through May 5, they increased their net long in CBOT soybean futures and options to 8,908 contracts from 4,392 a week earlier. That was primarily due to new longs entering the market.

Funds may have added up to 12,000 more soybean futures to their position over the last three sessions. Futures hit a two-week high on Friday, as traders were covering short positions ahead of USDA’s report on Tuesday. The possibility of China booking more U.S. beans was also supportive.

Money managers maintained bearish views in the soy products through May 5. They cut their net short in CBOT soybean oil futures and options to 6,754 contracts from 11,906 a week before, and they boosted their net short in soybean meal to 11,700 contracts from 7,964.

Investors have generally been optimistic on Chicago wheat since last October, but they significantly reduced their net long through May 5 to 3,840 futures and option contracts from 15,975 in the previous week. Commodity funds were likely still in bullish territory, albeit slightly, by the end of last week.

Money managers modestly extended their net long in Kansas City wheat futures and options to 7,834 contracts through May 5 from 5,474 a week earlier. But they established a record net short position in Minneapolis wheat futures and options of 23,893 contracts, up from 20,597 in the prior week.

The prior record Minneapolis short was 23,231 contracts set in the week ended Dec. 10, 2019. But prior to last year, funds’ bearish bets had never reached 13,000 contracts.

Analysts are concerned that the drop in global tourism has and will considerably dent global wheat demand, especially now that the panic buying period is mostly over.

USDA predicts that global wheat stockpiles will reach record levels by the end of June, and traders will be carefully watching the agency’s predictions on Tuesday for the upcoming year in order to further assess the potential demand impacts.

The opinions expressed here are those of the author, a market analyst for Reuters. 

Editing by Matthew Lewis

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