FORT COLLINS, Colo. (Reuters) - Dry weather and storm damage across the U.S. Midwest coupled with strong U.S. export demand sparked speculators’ biggest buying week in Chicago-traded grains and oilseeds in over a year, and soybeans led the charge.
When combining their moves in CBOT corn, wheat, soybeans and products, and Kansas City and Minneapolis wheat through Aug. 18, investors bought 201,537 futures and options contracts on the net, the most for a week since June 4, 2019.
Money managers’ net long position in CBOT soybean futures and options surged to 107,058 contracts through Aug. 18 from 26,864 a week earlier, according to data from the U.S. Commodity Futures Trading Commission.
That was funds’ second largest weekly purchase of soybeans on record behind the week ended July 11, 2017, which had been driven mostly by short covering. But that was not the case last week as investors added 46,168 gross soy longs, a new weekly record in data back to 2006.
Short covering was relatively heavy, also, as the removal of 34,026 gross shorts was the 10th largest in history. Investors’ net long as of Aug. 18 is their biggest since the U.S.-China trade war began in 2018.
China’s appetite for U.S. soybeans has been extremely robust in recent weeks, and that continued Friday with another purchase of 400,000 tonnes. Yield-boosting rains have also been light or absent across dry soybean-growing areas of the U.S. Midwest, raising crop concerns.
Most-active soybean futures fell 1% over the last three sessions, though they hit $9.19-1/2 per bushel on Wednesday, the highest since Jan. 22. Trade estimates suggest commodity funds sold around 6,000 soybean futures between Wednesday and Friday.
Those trade guesses pegged last week’s soybean buying at around 31,000 futures contracts, well below the reality of 80,194, which also included options.
The trade’s 12,500-contract prediction of fund buying in soybean meal futures in the week ended Aug. 18 was also way too light considering the 40,270 futures and options contracts purchased. That flipped money managers to a net long of 10,979 contracts, and about three-fourths of that move was due to short covering.
Funds also expanded their net long in soybean oil futures and options to 57,524 contracts through Aug. 18 from 52,143 a week earlier. Most-active meal and oil futures both rose about 4.6% during the period, and the latest week is only the fourth since Jan. 2018 in which funds were bullish toward both products.
Soybean meal fell 1.8% over the last three sessions and soybean oil dropped 0.7%, and funds were seen as light net sellers of the soy products.
GRAIN SHORT COVERING
In the week ended Aug. 18, money managers slashed their net shorts in CBOT corn futures and options to 110,499 contracts from 172,361 in the previous week, and that was on par with trade estimates. About 80% was due to short covering.
Most-active corn futures surged 5.6% during the period after a devastating windstorm, known as a derecho, flattened corn fields across a wide swath of the top U.S. producer Iowa on Aug. 10. The state and some surrounding areas have also been in a drought and rainfall amounts continue to disappoint.
Commodity funds are not expected to have materially changed their corn views late last week, and futures fell 0.4% over the last three sessions. After Friday’s close, advisory service Pro Farmer pegged the U.S. corn crop at 14.82 billion bushels after a seven-state, four-day crop tour, and that is 3% below the latest government number.
Speculators bought wheat through Aug. 18 to a much lesser degree than they did corn or soybeans, but they were buyers across all three contracts, the first such instance since March.
Most-active CBOT wheat futures jumped 4.5% through Aug. 18, but money managers cut their net short position by a modest 3,058 futures and options contracts to 12,474. That was almost entirely driven by short covering.
However, trade estimates suggest that funds held a slight net long in CBOT wheat after Friday’s close, as futures rose another 3.4% between Wednesday and Friday. The dollar is at the weakest level in more than two years, making U.S. wheat more attractive on the world market, and production concerns still loom for some major suppliers.
Money managers reduced their net short in Kansas City wheat futures and options to 27,005 contracts through Aug. 18 from 34,592 a week earlier. They also cut bearish bets in Minneapolis wheat to 21,328 contracts from 24,513.
The opinions expressed here are those of the author, a market analyst for Reuters.
Editing by Chizu Nomiyama
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