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Column: Funds snatch up CBOT corn despite record U.S. crop forecast

FORT COLLINS, Colo. (Reuters) - Last week’s government forecast of U.S. corn and soybean crops suggests ample supplies for at least the next year, but speculators were buying Chicago futures late last week as some of those numbers came under scrutiny after severe storm damage.

Corn Kernels sit inside a silo on BJ Reeg's farm in Bellevue, Iowa, U.S., July 26, 2018. REUTERS/Joshua Lott

In the week ended Aug. 11, money managers trimmed their net short position in CBOT corn futures and options by just 459 contracts on the week to 172,361 contracts, according to data from the U.S. Commodity Futures Trading Commission.

Most-active corn futures rose 1% during that week, but they surged 4.5% between Wednesday and Friday, nearing one-month highs on Thursday. Trade estimates suggest commodity funds bought 56,500 futures contracts over the last three sessions.

The U.S. Department of Agriculture published its August crop production report on Wednesday, and although the U.S. corn crop came in larger than the trade expected, the derecho storm that tore through the Midwest last Monday added a lot of uncertainty to the outlook.

That storm impacted 37.7 million acres of farmland, some 14 million in Iowa alone. It also caused widespread damage to commercial grain storage facilities, which will complicate the fall harvest.

USDA’s Farm Service Agency published acreage data on Wednesday, and that data is more incomplete than usual, leading some to believe that U.S. planted area could be smaller than government forecasts suggest. But reporting delays due to the coronavirus pandemic might be the main culprit, and acreage could make substantial jumps in future reports.

Through Aug. 11, money managers cut their net long position in CBOT soybean futures and options to 26,864 contracts from 44,219 in the prior week, and that was associated with a nearly 1% drop in most-active futures.

Soybean futures rose nearly 3% over the last three sessions, even after USDA predicted a much larger U.S. soybean inventory than the market, and funds were seen buying 18,000 futures contracts. Strong export demand is in focus for soybeans, as the storm is seen having a lesser impact on the oilseed than on corn.

On Friday, top soybean buyer China was confirmed to have made a large purchase of the U.S. oilseed for the eighth consecutive trading day. As of Aug. 6, U.S. soybean sales to all destinations for the new marketing year starting Sept. 1 were a record-large 18 million tonnes, narrowly surpassing 2014’s high for the date.

SOY PRODUCTS AND WHEAT

Soybean oil futures fell 1.7% in the week ended Aug. 11, but money managers extended bullish bets to 52,143 futures and options contracts from 48,333 a week earlier. They also increased bearish bets in soybean meal to 29,291 futures and options contracts from 20,985 in the prior week.

That brought funds’ net long in the CBOT oilshare, which measures soyoil’s share of value in the soy products, to 81,434 futures and options contracts. That is their most bullish view since February.

Soybean oil futures have been on the rise since April, reaching the highest levels last week since early February. Since April, soybean meal futures have remained at decade-lows for the time of year.

Funds were seen as net buyers in the soy products over the last three sessions, as soyoil futures rose 1.9% and soymeal rose 3.1%.

In the week ended Aug. 11, money managers dumped their net long in CBOT wheat futures and options, establishing a net short of 15,532 contracts. That compares with a net long of 1,178 contracts a week earlier and it is funds’ first bearish wheat stance in four weeks.

That was associated with a 2.6% drop in most-active wheat futures, but the contract rallied back 1% between Wednesday and Friday on technical buying and strength in corn. However, funds are not expected to have chipped away too much at their new short position.

Investors also sold the other wheat contracts through Aug. 11. They expanded their net short in Kansas City wheat futures and options to 34,592 contracts from 25,811 a week earlier, and they upped bearish Minneapolis bets to 24,513 contracts from 22,000.

On Friday it was announced that options exchange operator Miami International Holdings (MIH) will acquire the Minneapolis Grain Exchange, the last independent U.S. grain exchange, and the deal is expected to close later this year.

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

Editing by Cynthia Osterman

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