June 29, 2020 / 8:58 AM / 11 days ago

Column: Funds boost bullish soy bets but shun corn and wheat

FORT COLLINS, Colo. (Reuters) - Speculators continued buying Chicago-traded soybeans last week on improved prospects for U.S. trade with China, though benign U.S. weather forecasts turned them back into corn sellers after a brief round of short covering in the previous week.

Soybeans are harvested from a field on Hodgen Farm in Roachdale, Indiana, U.S. November 8, 2019. REUTERS/Bryan Woolston

In the week ended June 23, money managers increased their net short position in CBOT corn futures and options to 277,479 contracts from 270,751 a week earlier, according to data from the U.S. Commodity Futures Trading Commission.

At the same time, money managers expanded bullish bets in CBOT soybean futures and options to 44,285 contracts from 21,183 a week earlier. That pushed funds’ net long in the soybean-to-corn spread to a new record of 321,764 contracts.

The last time investors held a more bullish view of soybeans on June 23 was in 2016, as they were bearish both this time last year and in 2018 as the U.S.-China trade war was starting.

Funds have never been anywhere close to this bearish toward corn during June, though their number of outright long positions last week reached the highest level since mid-March. Outright short positions remain at a record high for the time of year.

Traders have been increasingly enthusiastic about U.S. soybean exports to China as purchases have been relatively strong this month, and unlike corn, U.S. soybean supplies are not expected to explode over the next year.

Weather across the U.S. Corn Belt has been largely favorable for growing the yellow grain this summer, and the forecasts continue to support record yield outlooks. Conditions have also been good for growing soybeans, though yield will be highly dependent on rainfall later in July and August.

The U.S. Department of Agriculture on Tuesday will issue the results from its second round of farmer planting surveys, and the trade sees corn acres falling 1.8 million from the March number. However, the estimated 95.2 million acres of planted corn could still easily produce a record crop, padding stockpiles even further.

Commodity funds are predicted to have sold 38,000 corn futures between Wednesday and Friday, which would have placed their net position to end the week at over 300,000 contracts for only the fourth time in history. December corn futures hit contract lows on both Thursday and Friday.

Most-active soybeans fell 1.6% over the last three sessions and funds likely reduced their net long during that period, but they are not expected to have erased bullish views.

Funds were seen as sellers of both soybean meal and oil between Wednesday and Friday, with a heavier emphasis on the latter. Most-active soybean oil futures fell 3.4% during the period.

In the week ended June 23, money managers cut their net short in soybean oil futures and options to 721 contracts from 4,786 a week earlier. They also trimmed bearish bets in soybean meal futures and options to 46,012 contracts from 48,208.

WHEAT PESSIMISM

Speculators were extremely optimistic toward Chicago wheat futures and options at the beginning of the year, but the tables have turned. Money managers increased their net short to 48,213 contracts through June 23 from 30,251 a week earlier.

That move predominantly resulted from the addition of new shorts, and the new net position is the most bearish since mid-May 2019. Funds’ gross wheat longs totaled 56,685 contracts, the fewest since July 2016.

Open interest in CBOT wheat spiked 14% in the two weeks ended June 23, and most-active futures were down 4% during the period. The last time open interest rose that much was in the two weeks ended Jan. 21, though funds were net long more than 40,000 contracts at that time.

Commodity funds likely ended last week with an even more bearish outlook on CBOT wheat, and futures plunged to contract lows on Friday. Analysts cited U.S. harvest pressure, ample global supplies, and technical selling as reasons for the decline in price.

Through June 23, money managers adopted what is easily their most pessimistic Kansas City wheat view for the time of year, extending their net short to 37,292 futures and options contracts from 27,490 a week earlier. As in Chicago wheat, the K.C. move was largely due to the addition of shorts.

Funds still hold their most bearish Minneapolis wheat stance for the time of year, but they slashed their net short through June 23 to 13,940 futures and options contracts from 17,103 a week earlier. That marked their fifth consecutive net buying week in spring wheat.

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

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Graphic- Spread in managed money net position: CBOT soybeans to corn (futures and options) tmsnrt.rs/2ZapzmA

Graphic- Managed money net position in CBOT soybean futures and options tmsnrt.rs/3g3oaFq

Graphic- Managed money net position in CBOT corn futures and options tmsnrt.rs/2Vkh3jG

Graphic- Managed money net position in Chicago wheat futures and options tmsnrt.rs/2A7we8J

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Editing by Matthew Lewis

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