July 7, 2020 / 9:05 AM / a month ago

Column: Funds cover corn shorts on fewer U.S. acres and adverse weather

FORT COLLINS, Colo. (Reuters) - Speculators were forced to exit massive short positions in Chicago-traded corn last week as the U.S. government’s June acreage survey turned up a much smaller planted corn area than the market expected.

Paul Hodgen harvests corn from a field using a combine on his farm in Roachdale, Indiana, U.S. October 29, 2019. REUTERS/Bryan Woolston

That revelation coincided with a relatively hot and dry weather forecast for the U.S. Corn Belt in the early part of July, sending most-active CBOT corn futures last week to their highest levels since mid-March, right as the coronavirus pandemic was arriving.

In the week ended June 30, money managers slashed their net short position in CBOT corn futures and options to 201,648 contracts from 277,479 a week prior, according to data published on Monday by the U.S. Commodity Futures Trading Commission.

That net buy of 75,831 corn contracts was the largest for a single week in just over a year and it places in the top 20 weeks of all time. But it pales compared with the current record of 166,189 set in the week ended May 21, 2019.

Usually such moves are driven by short covering, which drove two-thirds of the most recent one. Funds added 24,189 outright long positions through June 30, the most for any week in exactly a year.

The U.S. Department of Agriculture’s June 30 acreage survey showed that U.S. farmers planted 92 million acres of corn for this year’s harvest, well below the trade expectation of 95.2 million. Analysts also overestimated U.S. soybean area by some 900,000 acres.

That jolted CBOT soybean futures and encouraged money managers to extend their bullish bets on the oilseed. They raised their net long to 67,836 futures and options contracts through June 30 from 44,285 in the prior week, and the new stance is funds’ most optimistic since October.

Investors added 18,615 outright soybean longs in the latest week, the most for any week since mid-March 2018, just before the U.S.-China trade war took off.

Increased U.S. soybean demand from top customer China has also excited the soybean market, and that continued on Monday as the Asian country booked another 264,000 tonnes of the oilseed to be shipped by Aug. 31. Most-active soybean futures settled at $9.06-1/4 per bushel on Monday, their first finish above $9 since March 4.

USDA also published U.S. grain stocks on June 30, which revealed more corn supply as of June 1 than analysts thought. Soybean supply was as expected, and these numbers will be considered in the agency’s next supply and demand report due on Friday.

Through Monday, commodity funds are expected to have cut down on corn bearishness even more. They are also predicted to have added to their net long in soybeans.

Money managers increased their net short in CBOT soybean meal futures and options to 52,497 contracts through June 30 from 46,012 a week earlier. They flipped to a slight net long in soybean oil futures and options of 847 contracts from a net short of 721 in the prior week, and they were likely net buyers of both soy products over the last three sessions.

Speculators are still solidly bearish toward wheat. They cut their net short in CBOT wheat futures and options to 38,812 through June 30 from 48,213 in the week before, but they are not predicted to have trimmed any further in the days since.

In the week ended June 30, money managers shaved 576 Kansas City wheat futures and options contracts from their net short, resulting in a new stance of 36,716 contracts. That is easily funds’ most bearish mid-year view on hard red winter wheat.

Funds snapped their five-week buying streak in Minneapolis wheat futures and options through June 30, boosting their net short to 17,742 contracts from 13,940 a week earlier. They have not held optimism toward spring wheat in nearly two years.

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

Editing by Matthew Lewis

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