CHICAGO: Nothing can rouse the soybean meal bulls quite like a weather scare in Argentina, and the week ended Jan. 23 was a case in point.
Dry weather has prevailed since late last year in much of Argentina, the world's leading exporter of soybean products. By mid-January, speculators on the Chicago Board of Trade decided the parched conditions had outstayed their welcome.
In the week ended Jan. 23, hedge funds and other money managers increased their net long in CBOT soybean meal futures and options to 33,221 contracts from 8,074 in the prior week, according to data from the US Commodity Futures Trading Commission.
The size of the buy was very similar to specs' move in the first week in December, when front-month soybean meal futures went on a comparable rally. Both the recent and December rallies were the most significant in soymeal since early July.
The action in meal spilled over into soybeans, and money managers reduced their bean short to 81,538 futures and options contracts from 103,397 in the previous week.
However, specs' net soy short is still very large relative to history. One year ago, funds held a net long position in soybeans of 176,410 contracts as the soy complex rallied on ultimately unwarranted fears that Argentina's crop was drowning in flood waters.
Despite the lift in beans and meal, soybean oil got no love from speculators in the week ended Jan. 23. Funds ramped up their bearish bets to 21,496 futures and options contracts from 5,832 a week earlier.
The nine-day rally in meal futures topped out on Thursday but closed sharply lower on Friday after the contracts spent much of the week in overbought territory. March soybeans closed lower accordingly on Friday, which was also spurred by poor US export sales earlier that day and a big crop looming in Brazil.
Trade sources indicate that over the previous three sessions, commodity funds were slight net buyers of soybean and soybean oil futures and net sellers of soybean meal.
Late in the day on Friday, weather models indicated better precipitation chances across Argentina over the next several days than previous runs had suggested.
GRAIN HANGOVER
Argentina's drought concerns have spilled over to the corn market, as agencies are starting to cut their harvest estimates for the major exporter. Rains in Northern Brazil that are thought to be delaying the soybean harvest would also delay planting of the country's heavily exported safrinha corn crop.
Drought conditions are spreading across key US winter wheat states in the Southern Plains, and forecasts continue to be stingy with precipitation. Additionally, money managers' enormous short positions in CBOT corn and wheat have led to some technical upside moves in the futures.
But speculators are unable to shake the bulky numbers delivered by the US Department of Agriculture back on Jan. 12 that cemented the fact that there was no shortage of corn or wheat in the world, and funds' bearish grain views remained intact last week.
Through Jan. 23, money managers trimmed their net short in CBOT corn futures and options to 219,676 contracts from 226,876 in the prior week.
However, they expanded their bearish stance in CBOT wheat to 145,408 futures and options contracts from 142,939 a week earlier. They also increased their net short in K.C. wheat futures and options to 15,962 contracts from 12,386 in the prior week.
Funds nearly eliminated bullish bets in Minneapolis-traded wheat futures and options, dropping their net long to just 332 contracts from 2,764 in the previous week. They have not held a bearish view toward hard red spring wheat since April 25.
Grains finished out last week on a positive note, though, as commodity funds were likely net buyers of CBOT corn and outright buyers in CBOT wheat.
The most-active wheat contract rose 4.6 percent over the last three sessions, the most for a three-day period since July. Short covering, technical buying and a weaker dollar all contributed to the action, along with the dry US Plains and decent export sales on Friday.
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