September 9, 2019 / 9:35 AM / 7 days ago

Column: Funds strengthen bearish corn bets ahead of Thursday's USDA data

CHICAGO (Reuters) - Speculators boosted pessimism toward Chicago-traded corn last week and maintained their negative soybean views, and this could limit downside in the futures market later this week if the market expectations prove too light yet again versus the U.S. government’s outlooks.

FILE PHOTO: Farmer Dave Walton holds soybeans in Wilton, Iowa, U.S. May 22, 2019. REUTERS/Kia Johnson

Global corn supplies are plentiful and demand for the U.S. product remains weak.

Corn futures have been especially subdued ever since the U.S. Department of Agriculture on Aug. 12 projected the domestic crop to be much larger than traders expected.

USDA’s next batch of estimates is due on Thursday at noon EDT (1600 GMT), and analysts predict that the U.S. corn crop will shrink by about 2% on a yield of 167.2 bushels per acre, down 2.3 bushels from USDA’s August peg.

In the week ended Sept. 3, hedge funds and other money managers expanded their net short position in CBOT corn futures and options to 119,371 contracts from 94,137 in the prior week, according to data from the U.S. Commodity Futures Trading Commission.

The new corn stance is funds’ most bearish since mid-May, and the number of outright long positions in the market is also the smallest since early 2016 and is among the lowest of all time.

CBOT December corn futures slid to contract lows on Friday, settling at $3.55-1/2 per bushel. That price is somewhat consistent with previous years on the same date but well off the mid-June high of $4.73. Commodity funds were estimated to have sold another 37,000 corn futures contracts over the last three sessions.

December corn closed at $4.17-3/4 per bushel on the Friday before the Aug. 12 USDA report, which was a six-year high for the date. The contract plunged nearly 10% over the next two days, but funds were long about 45,000 corn contracts by the end of that period. They had been long around 80,000 contracts a week before.

Market analysts predict a 3% drop in the U.S. soybean crop from USDA’s August forecast and despite record inventories, they also see the possibility for U.S. ending stocks to shrink by 38% on the year. But investors are still heavily bearish toward the oilseed. In the week ended Sept. 3, money managers trimmed their net short to 73,127 soybean futures and options contracts from 76,047 a week earlier.

November soybean futures have traded below $9 per bushel since the end of July, and the trajectory has been generally downward. On Thursday it was revealed that the United States and China will resume high-level trade talks in early October, but this failed to lift the market as funds were likely net sellers of soybeans between Wednesday and Friday.

Money managers increased bearish bets in CBOT soybean meal through Sept. 3 to 43,528 futures and options contracts from 35,017 in the prior week. They also trimmed their net short in soybean oil to 12,731 futures and options contracts from 14,523 in the week before.

Speculators are now the most pessimistic toward Chicago wheat futures and options since the end of May, as they extended their net short to 21,037 contracts through Sept. 3 versus 3,056 a week earlier.

Wheat futures have been under pressure since June, following along with the slide in corn. Plentiful supplies are also a broad theme in the wheat market, but dryness in major exporter Australia and a weakening in the dollar likely caused commodity funds to be net buyers of the grain over the last three trading sessions.

Kansas City wheat continues to trade at an abnormally large discount to Chicago, and funds dialed up bearishness even further last week. They expanded their net short to 45,029 futures and options contracts in the week ended Sept. 3 from 36,651 in the prior week, and the new stance is the most negative since May.

Funds established yet another record short position in Minneapolis wheat futures and options through Sept. 3 of 21,148 contracts, up from 20,290 a week earlier. They have not been bullish in spring wheat for exactly one year.

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

Editing by Matthew Lewis

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