Funds’ bullish CBOT grains views tracking anomalous 2011 strength

Speculators’ unusually bullish bets combined across Chicago-traded grains and oilseeds have been largely unchanged since late December based on thinning stockpiles and strong demand, especially for soybeans and corn.

That trend compares well with the same period in early 2011 and is near the historical max, but funds had slowly reduced bullishness into March and April of that year.

However, speculators did not turn net bearish on grains and oilseeds until July 2013, a bullish streak that started in March 2009. Within the last five years, funds have held a collective net short 60% of the time, though they have been net long since August 2020.

Most-actively traded CBOT corn, soybean and wheat futures are stronger than in late December, but they are currently trading off their recent highs.

As of Feb. 16, money managers’ net long position in CBOT corn stood at 365,785 futures and options contracts, up nearly 7,000 contracts from the week before. That is according to data published on Friday by the U.S. Commodity Futures Trading Commission.

Money managers cut their net long position in CBOT soybean futures and options in the week ended Feb. 16 to 161,410 contracts from 171,770 a week earlier, and that was due to the reduction of outright longs.

Both soybean and corn futures had fallen in the four-session week ended Feb. 16, and open interest dropped a respective 2% and 1% during the period, still maintaining unusually strong levels.

Funds’ net long positions in CBOT soybean oil and soybean meal futures and options were 110,396 and 69,422 contracts as of Feb. 16, respectively, representing negligible changes on the week.

Between Wednesday and Friday, corn and soybean futures drifted lower yet again, but the U.S. Department of Agriculture on Friday revealed outlooks suggesting that the historically tight domestic stockpiles will continue to be a theme until at least August 2022, supporting the longer-term bullish ideas.
WHEAT AND LIVESTOCK

USDA also projected U.S. wheat stocks at eight-year lows by mid-2022, though traders in the shorter term are monitoring potential damage to the U.S. winter crop from the record cold blast that gripped the nation a week ago. It may be several weeks before losses can be determined.

But through Feb. 16, speculators’ views toward winter wheat were little changed. Money managers increased their net long in CBOT wheat futures and options to 21,285 contracts, up nearly 2,000 on the week. They also reduced bullish bets in Kansas City wheat by about 3,000 contracts, resulting in a net long of 57,133.

Money managers trimmed their net long in Minneapolis wheat futures and options to 12,212 contracts from 12,933 a week earlier, still very optimistic for the time of year. USDA implied that U.S. spring wheat acreage would be down this year in favor of corn and soybeans.

Strong demand for meat both on the export front and at home as COVID-19 restrictions begin to ease has sent Chicago Mercantile Exchange lean hog futures to contract highs over the last couple of weeks. The historic winter blast across the country and elevated pork prices in China have also been supportive.

Investors’ optimism toward hogs has been on the uptrend, increasing sharply in the week ended Feb. 16. Money managers’ net long jumped more than 11,000 contracts on the week to 67,187 futures and options contracts, their most bullish stance since December 2017.

Money managers’ net long in live cattle futures and options has also been surging over the last month, reaching 92,088 contracts on Feb. 16, their most bullish since May 2019.

Daily USDA cattle and hog slaughter estimates for this past week dipped below recent levels as the severe cold spell caused power interruptions and slowed operations. Additionally, Cargill Inc said last week that the meat supply chain was experiencing delays due to storm-related transportation problems.

The opinions expressed here are those of the author, a market analyst for Reuters.
Source: Reuters (Editing by Matthew Lewis)