November 19, 2019 / 12:56 PM / 25 days ago

Column: Funds remain stubbornly bearish CBOT corn through slow U.S. harvest

FORT COLLINS, Colo. (Reuters) - Despite a historically slow U.S. corn harvest pace and the associated strong cash markets, speculators refuse to budge from pessimistic views on Chicago-traded corn, seemingly focused on projections for global supply to remain ample headed into next year.

A farmer's corn harvesting combine is seen during the corn harvest as farmers struggle with the effects of weather and ongoing tariffs resulting from the trade war between the United States and China that are effecting their agricultural business in Eldon, Iowa U.S. October 4, 2019. REUTERS/Kia Johnson

In the week ended Nov. 12, hedge funds and other money managers extended their net short position in CBOT corn futures and options to 110,921 contracts from 104,846 a week earlier, based on data from the U.S. Commodity Futures Trading Commission.

According to trade estimates, commodity funds likely sold around 20,000 corn futures contracts between Wednesday and Friday, further adding to the bearish sentiment. Most-active corn futures lost 1.7% over those three days and settled Friday at the lowest point in nearly two months.

Corn opened at $3.71 per bushel on Monday and was trading a couple cents lower midway through the session. The U.S. Department of Agriculture on Monday morning confirmed the sale of 132,000 tonnes of U.S. corn to unknown destinations, but that failed to lift the market.

The current futures price of around $3.70 per bushel is roughly 8 cents higher than a year ago and the strongest level for the date in five years. Earlier this month, USDA projected U.S. corn ending stocks at 1.91 billion bushels for 2019-20, down about 10% from the previous year.

However, the 2018-19 prediction in November 2018 was 1.74 billion bushels, down from 1.81 billion in the previous month. A year ago, funds held a net long in corn futures and options of about 18,000 contracts.

Poor export demand for U.S. corn has been one of the sticking points for bears, and data from USDA reinforced that idea on Monday morning. Export inspections for the week ended Nov. 14 came in at 637,397 tonnes, the largest for any week so far in 2019-20, but the season total is down 58% from the same date last year and down about 25% from 2017.

Through Nov. 12, money managers reduced their net long position in CBOT soybean futures and options to 31,050 contracts from 58,429 a week prior. This included the pullout of 16,000 outright long positions, the largest weekly exodus of longs since June 12, 2018, just as the U.S.-China trade war was beginning.

Commodity funds are presumed to have bought back some of those futures contracts late last week, but the oilseed was down a few cents midway through trading on Monday.

Soybean traders have been largely focused on a pending “Phase 1” trade deal between the United States and China, the world’s primary soy consumer. The two sides reportedly had “constructive talks” via phone over the weekend, though an exact time frame on a firm trade deal remains unknown.

Demand for U.S. soybeans has been so-so. U.S. oilseed processors crushed a record-large volume of soybeans last month at 175.397 million bushels, topping the previous high by more than 3 million bushels.

However, export demand has not been overly strong. U.S. sales for 2019-20 are slightly above last year’s levels, which were the lowest since 2011. Season-to-date U.S. export inspections are 12% above a year ago but down around 35% from the same point in 2017.

SOY PRODUCTS AND WHEAT

Money managers added to their bullish bets in CBOT soybean oil futures and options in the week ended Nov. 12, moving to 88,097 contracts from 84,643 a week earlier. Funds were likely net sellers of bean oil late last week, though.

Most-active soybean oil futures earlier this month reached their highest levels since May 2018 on soaring palm oil prices and a tightening global vegoil market, especially with soybean crush down in China. Futures have backed off about 1% since then.

Through Nov. 12, money managers cut their net short in soybean meal futures and options to 23,483 contracts from 37,554 a week prior, and they likely continued the buying trend through the end of last week.

Investors last week maintained their relatively neutral outlook for CBOT wheat. Through Nov. 12, they flipped to a net long of 391 futures and options contracts from a net short of 654 contracts a week before.

Funds were pegged as net sellers of Chicago wheat late last week, but midway through trading on Monday, most-active futures were up a few cents per bushel.

The negative mood continues for the other wheat contracts. Money managers cut their net short in Kansas City wheat futures and options through Nov. 12 to 22,689 contracts from 33,929 a week before. They upped bearish bets in Minneapolis wheat futures and options to 11,570 contracts from 9,044.

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

Editing by Matthew Lewis

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