Funds cover CBOT wheat shorts but bearish streak nears record

The new net short is a seven-week low but remains historically large. — Reuters

SPECULATORS have been holding a near record short across Chicago grains and oilseeds for most of this year, but last week they staged their biggest round of short covering since mid-2023 as supply uncertainties creep back in.

Wheat was the biggest mover with July futures up 6.7% in the week ended April 23, and money managers reduced their net short position in CBOT wheat futures and options to 76,184 contracts from 96,403 a week earlier. That included funds’ largest round of short covering since December.

The new net short is a seven-week low but remains historically large.

Money managers have maintained a net short in CBOT wheat since early July 2022, when most-active futures were trading in the US$8-per-bushel range.

Bearish territory

The latest week marks funds’ 95th consecutive week in bearish CBOT wheat territory, approaching the record 100 set between mid-2015 and mid-2017, a period characterised by heavy global supplies and decade-low prices.

CBOT wheat added another 3.2% between last Wednesday and Friday and finished at US$6.22-1/4 per bushel last Friday, the most-active contract’s highest settlement since Dec 29.

Wheat has gained 12.5% in this latest, six-session move.

Worsening wheat conditions across the US plains and extended dryness in top exporter Russia have triggered the latest move as have unfavourable weather conditions across parts of Europe.

India, recently a major wheat exporter, may have to import wheat for the first time in several years.

Money managers still hold extremely bearish positions in Kansas City and Minneapolis wheat futures and options, and they only lightly trimmed these views in the week ended April 23.

Big speculative grain shorts ahead of the US growing season are risky, and this, along with wheat’s latest rally, also justified significant short covering in corn.

Money managers cut their net short in CBOT corn futures and options to a 15-week low of 238,546 contracts as of April 23 from 279,570 a week earlier.

July corn rose 2.2% in that week but fell fractionally in the following three sessions.

US corn planting, on schedule for now, will remain a focus for the market in the coming days with an expected wet open to May.

Short covering was prominent through April 23 in CBOT soybeans, where money managers lowered their net short to 149,014 futures and options contracts from 167,875 a week earlier.

That is still one of funds’ most bearish soybean views of 2024 so far.

July soybeans were up nearly 2% during that week, though gains were limited by Brazil’s strong crop and questionable Chinese demand.

For the first time in 17 years, China has no new-crop US cargoes booked as of mid-April.

Money managers for the first time since January restored bullishness in CBOT soybean meal, establishing a net long of 19,681 futures and options contracts as of April 23 versus a net short of 10,543 contracts a week earlier. July meal was up nearly 3% in the period.

Supply boost

A large, expected supply build in top meal exporter Argentina made funds abandon their super bullish meal bets between November and January, but Argentina’s soy crop has run into some hiccups and may not be as large as originally thought.

Unwinding of long oil-short meal spreads have also contributed to meal’s boost.

July bean oil reached contract lows in the week ended April 23, though they finished up about 1%.

Money managers reduced their heavy net short by about 3,800 contracts to 49,528 futures and options contracts.

July soybeans, meal and oil all fell fractionally between last Wednesday and Friday.

Last Saturday, oilseed workers at one of Argentina’s largest ports announced they will begin striking on Monday, potentially hampering meal and oil exports. — Reuters

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

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