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Column: Funds boost CBOT corn optimism but face virus-fuelled setback

FORT COLLINS, Colo. (Reuters) - Speculators’ overall optimism about Chicago-traded grains and oilseeds rose last week to within striking distance of record bullishness for any time of the year, and that largely owed to strong buying in corn.

An aerial view of corn fields, some covered in snow, in Belle Plaine, Minnesota, U.S., October 24, 2020. Picture taken with a drone on October 24, 2020. REUTERS/Bing Guan

But increasing pandemic fears and improving crop weather went against bulls late in the week.

Combined across Chicago corn, wheat, soybeans and products, and Minneapolis and Kansas City wheat, investors through Oct. 27 bought nearly a million futures and options contracts since the rally began in mid-August, the most ever for such a period.

In the week ended Oct. 27, money managers boosted their net long position in CBOT corn futures and options to 276,235 contracts from 218,825 a week earlier, according to data from the U.S. Commodity Futures Trading Commission (CFTC).

That marked their 12th consecutive net buying week in the yellow grain, and established their most bullish view on the yellow grain since July 2015. It was also the most bullish view for the time of year since 2010.

Funds’ addition of outright longs, which dominated the latest move, was the largest for any week in nearly two years.

But investors continued to cover corn shorts last week as they have each week since mid-August. The number of outright shorts dwindled to 43,629 as of Oct. 27, the fewest since December 2012.

U.S. corn export demand remains extremely strong, including a 1.4 million-tonne deal to Mexico confirmed on Thursday.

But rising global coronavirus cases hit financial and commodity markets hard mid-week, and most-active corn futures fell 4.2% over the last three sessions. Technical selling also contributed to the slump after the contract on Tuesday reached its highest price since August 2019.

Commodity funds are predicted to have sold 56,500 corn futures between Wednesday and Friday. Within the last year, funds’ largest net selling week as reported by CFTC was about 34,000 futures and options contracts back in February.

In the latest week, investors flipped to a bearish stance on the CBOT soybean-corn spread for the first time since February. That net short of 43,518 futures and options contracts is the largest since August 2019.

SOY AND WHEAT

The managed money net soybean long rose to 232,717 futures and options contracts as of Oct. 27, an increase of just 825 contracts on the week. New longs slightly outweighed the addition of shorts, and the net long position continued to hover just below the May 2012 record of 253,889 contracts.

Most-active soybean futures rose 1.2% in the week ended Oct. 27, touching four-year highs on robust Chinese demand. Open interest fell by 12% from the previous week’s all-time high, and the decline was in line with seasonal trends.

Soybean futures were also a victim of global coronavirus fears last week, and much-needed Brazilian rains along with heavier than expected deliveries against the CBOT November contract weighed on prices. Soy futures fell 1.9% between Wednesday and Friday, and fund selling was pegged at 23,500 futures contracts.

Through Oct. 27, money managers increased their net long in soybean oil futures and options to 94,426 contracts from 82,034 a week earlier. The number of outright shorts fell to 9,208, the fewest since December 2016.

Funds’ soybean meal long jumped to 84,279 futures and options contracts through Oct. 27 from 81,624 a week earlier, mostly on the addition of new longs. Investors were likely net sellers of both products over the last three sessions.

Money managers barely changed their views in Chicago wheat futures and options through Oct. 27, reducing their net long by just 832 contracts to 48,896. The number of outright longs rose to 115,243 contracts, the most since February, when they were unusually elevated.

Most-active wheat futures had fallen 2.6% during that period, and heavier selling had been expected. The contract fell 2.8% over the last three sessions on profit-taking, rains in the dry U.S. Southern Plains, and concerns about virus impacts on the global economy.

Funds boosted their net long in Kansas City wheat futures and options to 41,410 through Oct. 27 from 38,146 a week earlier despite a nearly 4% price slide during the period. K.C. futures fell 1.5% between Wednesday and Friday.

Money managers boosted their net long in Minneapolis wheat futures and options to 8,877 contracts through Oct. 27 from 4,492 in the prior week. That is funds’ most bullish spring wheat view since August 2017, when the U.S. crop was suffering from a historic drought in the Northern Plains.

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

Editing by Tom Brown

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