Fund pessimism in CBOT grains approaches all-time levels

An aerial view of a combine harvester as it harvests soybeans in Deerfield, Ohio, U.S., October 7, 2021. Picture taken with a drone. Picture taken October 7, 2021. REUTERS/ Dane Rhys/File Photo

THE US corn and wheat futures have recently hit contract lows and multi-year lows on a most-active basis, tumbling significantly from record or near-record highs set last year.

But speculators’ enormous short positions imply the expectation of additional downside to prices.

In the four-session week ended Nov 28, money managers’ combined net short position in US grain futures and options, including Chicago corn and wheat, Kansas City and Minneapolis wheat, topped 400,000 contracts for the seventh time since records began in 2006.

That is safely the most bearish for the time of year and it ranks sixth all-time behind a five-week stretch from April to May 2019.Money managers’ net short in Chicago Board of Trade (CBOT) corn futures and options rose to 206,478 contracts through Nov 28 from 185,502 a week earlier, driven by another large uptick in gross short positions.

Funds’ new corn stance is their most bearish since June 2020 and most bearish ever for the time of year, surpassing the prior threshold set in 2017.

In CBOT wheat, money managers’ net short of 119,986 futures and options contracts as of Nov. 28 is their most bearish since May, and it is roughly tied with 2016 and 2017 for the date’s most bearish. That compares with a net short of 108,176 contracts a week earlier.

Both corn and wheat open interest plunged in the week ended Nov 28 as is seasonal.

Corn open interest is among the date’s lowest in the last decade, though it is a bit closer to average for wheat.

Money managers through Nov 28 extended their KC wheat net short to near 50,000 futures and options contracts, their largest since May 2019 and among their biggest-ever shorts. Funds’ Minneapolis net short grew slightly to near 29,000 contracts, close to the recent record.

The US government predicts record global corn production in the current marketing year and a multi-year high in stockpiles, led by a record US crop.

However, the wheat situation is forecast to tighten, especially among major exporters.

Grain futures sank in the week ended Nov 28, including a 3.2% decline in CBOT March corn and a 1.8% slide in March wheat. Corn hit contract lows on Nov 29 but popped 2.4% over the last three sessions as US export sales were larger than expected.

CBOT March wheat found contract lows on Nov 27 but touched three-week highs by last Friday, presumably motivated by short covering.

March wheat rallied 7.4% over the last four sessions, the largest four-session win for the most-active contract since late July.

Money managers were also net sellers in the CBOT soy complex in the week ended Nov 28 with January beans down 2.2%, January meal down 2.6% and January soyoil off nearly 1%.

Funds in that week cut their net long in CBOT soybean futures and options to 67,562 contracts from 81,587 a week earlier.

They also trimmed their sizable net long in CBOT soymeal futures and options by about 2,000 to 135,798 contracts, and meal open interest declined seasonally but remains strong.

Money managers increased their modest net short in CBOT soybean oil through Nov 28 to 4,720 futures and options contracts from 2,831 a week earlier.

The soy complex weakened further late last week as rains were in the forecast for parched areas of Brazil.

January beans dropped 1.6% in the last three sessions, meal lost 4.1% and oil slid 2.8%. January meal notched a one-month low on Friday and beans matched a one-month low. —Reuters

Karen Braun is a market analyst for Reuters. The views expressed here are the writer’s own.

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