Sizable fund shorts still hang over CBOT grain market

There is simply too much supply in the world to shake speculators from their tremendously bearish view of Chicago-traded grain futures and options, and their hefty short stance still looms over the market. Combining net positions through November 21 in CBOT corn and wheat, K.C. wheat, and Minneapolis-traded wheat futures and options, money managers hold a short position in grains twice as large as they did one year ago, which had been near record for the time of year.
Despite a 1 percent slide in benchmark CBOT March wheat futures over the period, specs barely changed their minds on the soft red winter wheat in the week ended November 21. According to data from the US Commodity Futures Trading Commission, funds slightly extended bearish bets in Chicago wheat to 108,666 futures and options contracts from 108,576 in the week prior, largely on offsetting additions of both shorts and longs.
This is slightly less pessimistic than funds' year-ago short stance of 114,222 futures and options contracts. Wheat futures have hit contract lows in the days since as export data for the US product has disappointed amid stiff global competition, especially from the Black Sea. Over the last three sessions, trade sources suggest that funds have been outright sellers of wheat futures.
In K.C. wheat futures and options, money managers extended their net short to 20,741 contracts from 10,424 in the week prior. The March contract has dropped 3 percent over the last two sessions, and speculators are likely to shrug off Monday's 2-point decline in US winter wheat conditions. Funds increased their net long in Minneapolis wheat futures and options to 7,011 contracts from 6,664 a week earlier, but hard red spring wheat futures have also experienced notable declines in the last two sessions, particularly on Monday.
Corn futures have been pulled down with wheat over the last two sessions, but even apart from the wheat influence, record US corn yields and improving weather forecasts for South American growing regions have stifled any sense of urgency for speculators to ditch their record bearish corn views. During the week ended November 21, the front-month contract surged 2 percent, the largest percentage gain over a five-day period since mid-September.
In that week, money managers cut their bearish bets in CBOT corn to 210,466 futures and options contracts from a record 230,556 in the previous week, although the new stance is still the third-largest fund net short on the yellow grain. However, total open interest in the corn market fell nearly 2 percent over the period - generally a bearish signal if price is rising. Open interest fell another 2 percent by Friday's close after nearly reaching an all-time high a week earlier.
Commodity funds have likely been net sellers of CBOT corn over the last three sessions, with the heaviest activity on Monday as benchmark March futures dipped 1 percent. Cautiously bullish views toward the CBOT soya complex have been largely steady for about a month as speculators weigh factors such as uncertainty over the exact size of the US harvest, unfavourably dry weather in Argentina, and improving weather in Brazil as sowing continues in the South American countries.
In the week ended November 21, money managers shaved their net long in CBOT soyabeans to 20,144 futures and options contracts from 22,550 in the prior week, though trade sources indicate that funds have been net buyers of the oilseed in the days since. Speculators may be working toward a bearish position in the CBOT oilshare, which measures soyaoil's share of value in soyabean products, and this is a view they have not held since early May.
Through November 21, funds reduced their net long position in CBOT soyabean oil to 47,664 futures and options contracts from 56,675 a week earlier. At the same time, the fund long in soyabean meal futures and options rose to 15,909 contracts from 6,306. cThis cut the oilshare long to 31,755 futures and options contracts from 50,369 in the prior week, but the CBOT oilshare has fallen 3 percent in the days since with heavy selling in soyaoil and sizable buying in soyameal.