FORT COLLINS, Colo. (Reuters) - The recent selloff in Chicago-traded grain and oilseed futures and options has finally culminated in an all-time record short speculative position across that market.
It is very unusual for funds to get record short when the U.S. corn and soybean growing season is just around the corner, as both crops are the largest in the world. However, funds did the same thing two years ago, just one month later.
Combining money managers’ net positions in CBOT corn, wheat, soybeans and products, and Minneapolis wheat, produces an overall net short of 504,070 futures and options contracts for the week ended March 12. That topped the previous record of 480,592 combined contracts in the week ended Jan. 16, 2018.
Funds established a new record short position in CBOT corn futures and options through March 12 of 257,965 contracts versus 176,777 in the prior week, according to data from the U.S. Commodity Futures Trading Commission.
This comfortably surpassed the old record corn short of 230,556 contracts set on Nov. 14, 2017.
Investors also held a record-large number of outright short positions in corn as of March 12 with 462,416 contracts. The previous high was 438,172 set on Jan. 16, 2018.
On Dec. 18, money managers held a bullish corn view of 128,177 futures and options contracts, meaning they had sold 386,142 contracts on the net by March 12, equivalent to 1.93 billion bushels.
Between Dec. 18 and March 12, most-active corn futures fell about 20 cents per bushel or 5 percent.
When funds had sold just over 200,000 corn contracts between May 30 and June 19 last year, most-active futures had slid about 46 cents per bushel, nearly 12 percent.
CBOT May corn rallied 1 percent on Tuesday and another 2 percent between Wednesday and Friday. Trade estimates suggest that commodity funds bought 38,000 corn futures contracts over the last three sessions, though the actual number may be higher.
Funds have covered more than 200,000 corn shorts very quickly in the past, but that only occurred amid serious concerns over supply disruption, which is not exactly the mindset right now.
In the two weeks ended July 7, 2015, money managers bought 267,802 corn futures and options contracts amid weather concerns for the U.S. corn crop. They also bought 216,486 contracts in the two weeks ended April 26, 2016, as a drought was ramping up for Brazil’s highly exported safrinha corn crop.
Money managers’ longest bearish corn stint on record lasted 32 weeks between July 3, 2013, and Feb. 4, 2014. More recently, funds spent 26 weeks on the short side between August 2017 and February 2018, and 27 weeks between July 2016 and January 2017.
Money managers had a big week in soybean selling through March 12 as well. The new net short position surged to 90,197 futures and options contracts from 50,302 in the previous week.
This was funds’ tenth-largest soybean selling week on record, and the new short reached eighth all-time. Their biggest-ever bearish soy stance was 118,683 futures and options contracts set on June 27, 2017, but funds’ latest view is more pessimistic than at any time since the U.S.-China trade war began last year.
There was little action on the week in the soy products, by comparison. Through March 12, money managers extended bearish meal bets to 44,543 futures and options contracts from 42,200 in the prior week.
They also trimmed their bullish stance in soybean oil to 18,962 futures and options contracts from 21,038 a week earlier.
Trade estimates suggest commodity funds bought 10,000 soybean futures contracts between Wednesday and Friday. They were thought to have bought 10,500 meal contracts and to have sold 6,500 oil contracts.
The moves in wheat were also muted compared with those for corn and soybeans, though there was enough activity to establish a new record short position in Kansas City wheat.
Through March 12, money managers expanded their net short in K.C. wheat futures and options to 49,286 contracts from 44,870 in the prior week, which was the previous record.
Funds increased bearish views in Minneapolis wheat during the period to 8,893 futures and options contracts from 8,329 a week before.
The selling streak in CBOT wheat finally halted in the week ended March 12, anchored by a nearly 6 percent rally in the May contract on Tuesday. During the full week ended March 12, however, the contract had fallen 2 percent, even with Tuesday’s jump.
Money managers shaved their net short position in CBOT wheat futures and options to 72,148 contracts from 72,449 in the previous week. May futures rose another 1.6 percent over the last three sessions, and funds are pegged to have scooped up another 8,000 CBOT wheat contracts in that time frame.
The opinions expressed here are those of the author, a market analyst for Reuters.
Editing by Matthew Lewis