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Column: Funds pump up bullish CBOT bets amid robust global demand

NAPERVILLE, Ill. (Reuters) - Strong global demand and ideas China may significantly increase grain and oilseed imports beyond already elevated levels kept speculators buying Chicago-traded grains and oilseeds last week. Open interest also rose along with futures prices and fund optimism.

A combine harvests corn in Woodburn, Indiana, U.S., October 16, 2020. REUTERS/Bing Guan/File Photo

In the week ended Oct. 20, money managers increased their net long position in CBOT corn futures and options to 218,825 contracts from 170,869 a week earlier, according to data from the U.S. Commodity Futures Trading Commission.

That is funds’ most bullish view on the yellow grain since March 2018, and it was their 11th consecutive week of net buying. The first nine weeks of that streak were predominantly due to short covering, but new longs have since been in the driver’s seat.

Funds added 32,680 outright corn longs through Oct. 20, the most for a week in nearly two years. Investors have dumped nearly 300,000 outright corn shorts since the recent move began in early August.

CBOT December corn futures on Friday reached $4.20 per bushel, the highest for the most-active contract since Aug. 9, 2019, as potential loomed for China to substantially boost U.S. purchases.

Through September, China had nearly used up its annual low-tariff quota volume for corn imports, leading market participants to believe that Beijing must expand the allowance. China is already the top buyer of U.S. corn for the current marketing year, which is historically unusual.

Corn futures rose 2.6% between Wednesday and Friday, and trade sources estimate commodity funds bought 35,000 corn futures during the period.

SOYBEANS

Money managers increased their net long in CBOT soybean futures and options to 231,892 contracts through Oct. 20 from 226,444 a week earlier. That was mostly due to short covering, but longs came out of the market for a second straight week.

The number of gross soybean shorts as of Oct. 20 had dwindled to an eight-year low of 3,509 contracts.

Most-active soybean futures on Friday hit $10.88-1/2 per bushel, their highest since July 14, 2016. Futures rose 1.9% over the last three sessions on robust export demand and cash market strength.

Trade estimates peg fund buying in soybean futures over that period at 17,500 contracts. However, the soy predictions have been too optimistic in the latest three weeks.

Investors have nearly erased bullish views toward the CBOT oilshare, which measures soyoil’s share of value in the products. That net long dropped to just 410 futures and options contracts as of Oct. 20. Funds have not been bearish the spread since April.

That move in the oilshare was on funds’ extension of their net long in soybean meal futures and options to 81,624 contracts from 77,068 in the prior week. They trimmed their net long in soybean oil by just 154 contracts to 82,034.

Funds are predicted to have extended bullishness in both products over the last three days, but to a greater extent in meal. Most-active meal futures on Thursday reached $390.80 per short ton, their highest since May 15, 2018.

WHEAT

Speculators have been focused on rising global wheat prices, strong demand and dry conditions in primary exporters. Chicago wheat futures on Oct. 20 hit $6.38-1/4 per bushel, the highest for the most-active contract since Dec. 24, 2014.

Money managers increased their net long in CBOT wheat futures and options through Oct. 20 to 49,728 contracts from 38,590 in the prior week, resulting almost entirely from the addition of new longs. Prices have barely changed since then and the same is expected for the managed money position.

Funds also increased their net long in Kansas City wheat futures and options to 38,146 contracts through Oct. 20 from 32,197 a week earlier, but short covering drove that move.

Short covering was also prominent in Minneapolis wheat futures and options during that week, prompting money managers to establish a bullish spring wheat stance for the first time since Sept. 4, 2018. The new net long was 4,492 contracts versus a net short of 1,774 in the week before.

The week ended Oct. 20 is the first since January 2015 in which investors were bullish toward all seven Chicago- and Minneapolis-traded grains and oilseeds.

OPEN INTEREST

Combined open interest (OI) across CBOT corn, soybeans and wheat rose past 4 million contracts as of Oct. 20, an unusually large number for the time of year.

Soybean OI in the latest week reached another all-time high of 1.33 million contracts, though that represented a fractional weekly rise. Most-active futures were up 1.9% during that period. Seasonally, soybean OI tends to fall sharply during the last week of October.

Open interest for Chicago wheat surged 28% in the three weeks ended Oct. 20, associated with a 15% jump in futures. Wheat OI had been historically low in late August but is now closer to normal or slightly elevated levels.

Corn OI is the highest for late October since 2010, rising more than 7% in the latest week on a 4.5% boost in most-active futures. That is the largest weekly increase in corn OI since May 2019.

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

Editing by Cynthia Osterman

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