August 12, 2019 / 9:32 AM / 4 months ago

Column: Funds lighten bullish corn bets ahead of highly anticipated USDA data

CHICAGO (Reuters) - Speculators were sellers of all Chicago-traded grains and oilseeds early last week, but commodity funds are still carrying a decent-sized long position in corn ahead of Monday’s data dump from the U.S. government.

Corn grows in a field outside Wyanet, Illinois, U.S., July 6, 2018. REUTERS/Daniel Acker

The market expects that the U.S. Department of Agriculture report will show U.S. corn production significantly smaller than previously estimated. That is expected to drastically reduce year-end supplies, even though demand for the U.S. grain has been subpar.

Analysts also expect the USDA to make a more modest reduction to U.S. soybean production, though investors are already carrying a sizable short position in the oilseed.

In the week ended Aug. 6, money managers reduced their net long position in CBOT corn futures and options to 79,507 contracts from 111,952 a week earlier, according to data published on Friday by the U.S. Commodity Futures Trading Commission.

Investors shaved more than 100,000 contracts off their bullish corn stance in the three weeks ended Aug. 6, and that move was evenly balanced by reductions in outright longs and increases to outright shorts.

In soybean futures and options, money managers expanded their net short position to 72,813 contracts from 53,572 in the previous week, and the new stance is even more bearish than funds’ view from a year ago when the U.S.-China trade war was in its early days.

The soybean market has been under significant pressure ever since the United States entered the trade war last year with its top soybean customer China. U.S. President Donald Trump said on Friday that he was not ready to make a trade deal with Beijing.

Trade sources indicate that commodity funds likely bought around 14,000 contracts apiece in corn and soybean futures between Wednesday and Friday, as U.S. weather forecasts continued to drive uncertainty for the late-planted crops.

Investors are hanging on to their bullish bets in CBOT wheat futures and options, as they cut their net long to 6,219 contracts through Aug. 6 from 14,610 in the previous week. Trade estimates indicate funds were modest net buyers of Chicago wheat futures over the last three sessions.

Pessimism has dominated the Kansas City wheat market since December, and funds increased their net short to 20,748 futures and options contracts through Aug. 6 from 14,195 a week before. K.C. wheat is trading at a very large discount to Chicago at around 82 cents per bushel in the front month, and that spread has been historically wide for the entire year.

Money managers reached a new record short in Minneapolis wheat for the fourth week in a row through Aug. 6 after boosting their bearish view to 17,249 futures and options contracts from 16,586 a week prior.

Market analysts expect the U.S. wheat crop to come in at 1.925 billion bushels on Monday, fractionally larger than USDA’s previous estimate. World wheat supply for the 2019-20 marketing year is seen shrinking about 1% from the July forecast, but the expectation is that global supplies will be 3% larger than in the prior year.

Funds were sellers in soy products through Aug. 6, increasing their net short in soybean meal futures and options to 39,063 contracts from 32,294 in the prior week.

Money managers also expanded their net short in soybean oil to 37,075 futures and options contracts from 24,403 a week earlier, but trade sources suggest funds may have bought 19,000 futures contracts between Wednesday and Friday. They were also pegged as light buyers of soymeal during that period.

Soybean oil futures rose 7.2% over the last three sessions after China’s commerce ministry announced Wednesday that it planned to remove import quotas on soybean oil, rapeseed oil and palm oil. The price response was the largest three-day increase for the most-active contract since November 2016.

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

Reporting by Karen Braun; editing by Jonathan Oatis

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