June 8, 2020 / 9:11 AM / 25 days ago

Column: Funds enhance bearish corn bets despite rise in CBOT futures

FORT COLLINS, Colo. (Reuters) - Speculators have been bearish toward Chicago-traded corn for 10 months and they opened June with the most negative view in more than a year, despite the fact that futures have largely trended upward since the end of April.

Corn is harvested near Austin, Manitoba, Canada March 23, 2020. REUTERS/Shannon VanRaes/File Photo

Corn futures rose in the week ended June 2, but money managers increased their net short position in CBOT corn futures and options during the period to 282,266 contracts from 276,203 a week earlier, according to data from the U.S. Commodity Futures Trading Commission.

That is not far off from funds’ record short set in April 2019, and the increasing corn bearishness has been driven by the continual addition of gross shorts, while gross longs have remained near historic lows.

Gross corn shorts topped 400,000 contracts for the first time in a year through June 2 and if funds add any more, shorts would likely be record-large for the U.S. summer months.

But commodity funds were seen as buyers of corn futures in the last three sessions as prices rose more than 2%. Most-active corn futures on Friday hit their highest levels since April 13, and analysts attributed the move to short covering.

Meanwhile, producers continue to be reluctant sellers of corn, reducing their net long to 8,060 futures and options contracts from 15,309 a week prior. That is only the sixth week on record in which producers held a net long in corn.

As of June 2, investors’ views toward corn and soybeans were separated by nearly 290,000 contracts, the largest disparity since October 2013. Money managers had increased bullish bets in soybean futures and options by 824 contracts to 6,637 through last Tuesday, and they have likely turned even friendlier toward the oilseed in the days since.

Tensions between the United States and its largest soybean buyer China has been the prime source of pessimism over the last two years toward CBOT soybeans. But futures rose late last week as U.S. sales to China began to pick up, and prices on Friday also hit their highest mark since April 13.

The U.S. Department of Agriculture through its daily reporting system has confirmed at least 1.16 million tonnes of U.S. soybean sales since May 28. Barely one-quarter of those were to China while the rest were to unknown destinations, but traders are convinced that China was the buyer.

Money managers have been selling soybean meal futures and options since the end of March, and through June 2 they extended their net short to 50,981 contracts from 41,775 in the previous week.

That is very close to funds’ record short for the month of 54,430 contracts set back in 2017, and it had been the all-time high for any time of year until last September.

Meal futures rose 2% between Wednesday and Friday, and funds were predicted to have been net buyers during the period. They were also seen as net buyers of soybean oil futures.

Through June 2, money managers extended their net long in soybean oil to 11,376 futures and options contracts from 3,984 a week earlier. That is their most bullish soyoil stance since March 10, right as the coronavirus crisis began to set in, demolishing global oil demand.

Speculators’ wheat views were little changed last week. They increased their net short in CBOT wheat futures and options by 1,268 contracts to 13,472 in the week to June 2, though funds have been far more bearish toward Chicago wheat during June in several previous years.

Commodity funds were likely net buyers of Chicago wheat futures over the last three sessions, as futures rose on hot and dry weather in the U.S. Plains and a generally weaker dollar. Wheat futures late last week were higher than on the same date in recent years, but the difference was slight.

Through June 2, money managers knocked 1,610 contracts off their net short in Kansas City wheat futures and options, resulting in 24,133 contracts. They also erased 1,001 contracts from their Minneapolis short, which became 21,917 futures and options contracts.

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

Editing by Cynthia Osterman

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