FORT COLLINS, Colo. (Reuters) – Speculators were expected last week to have gone on a record buying spree in Chicago corn, but it was a commercial short squeeze that seemed to better explain the highly volatile price activity.
In the week ended April 27, money managers reduced their net long in CBOT corn futures and options to 378,663 contracts from 383,998 in the prior week according to data published on Friday by the U.S. Commodity Futures Trading Commission.
The trade estimates for the week were wildly off with expectations that funds bought nearly 150,000 corn futures, and this has been a theme in recent weeks. Funds were expected to have bought 66,000 corn futures in the week before last when they actually sold more than 17,000.
Recent assumptions about fund activity have seemingly applied greater weight to speculators’ influence on price action than the impact of commercials, and that was on display last week. The rally has forced end users without coverage to acquire supplies at painfully high prices.
Commercial end users covered nearly 67,000 corn short positions through April 27, though their shorts still numbered 1.45 million futures and options contracts, more than ever before at this time of year.
Other reportable speculators sold corn in the week and index traders offloaded a notable amount of both shorts and longs. Combined, index traders are holding the fewest number of corn shorts and longs since December, though their net long has not materially changed in recent weeks.
CME Group in mid-March expanded position limits for corn, wheat, soybeans and other commodities, and some market-watchers thought speculators would take this opportunity to place even bigger bullish bets, especially in corn. But that has not been the case so far.
Most-active corn futures rose 3% over the last three sessions including a limit-up move on Friday. The contract rose 19% in April and new-crop December corn gained 18%.
Most-active CBOT wheat also rose 19% in April, while soybeans gained 7%. Monthly gains for soybean oil totaled 18% but those for soybean meal were just 0.7%. New-crop November soybeans also rose 7%.
The most-active grain and oilseed contracts all hit multi-year highs last week except for soybean meal, which last Monday notched its highest price since early February.
SOYBEANS AND WHEAT
Money managers through April 27 lifted their net long in CBOT soybean futures and options to 180,014 contracts from 172,544 a week earlier. That was far lighter buying than the trade expected, but the new position is funds’ most bullish since the end of December.
Most-active soybeans were up 4.2% during the week and they rose another 1% in the last three sessions. Soybean meal was down fractionally between Wednesday and Friday, but bean oil jumped 2.5% after hitting 63.39 cents per pound on Tuesday, the contract’s highest price since July 2008.
Through April 27, money managers added 2,595 soybean oil futures and options contracts to their net long, which reached 92,587, their most optimistic in a month. They also added just over 6,000 contracts to their soybean meal long, boosting it to 54,086 futures and options contracts.
Substantial buying was expected in CBOT wheat futures and options in the week ended April 27 given the 11% price surge, though the actual buying was not that extreme. Funds increased their net long to 13,399 contracts from 1,583 a week prior, and that is their most bullish since mid-March.
Money managers staged their largest weekly buying spree in Kansas City wheat futures and options in nearly eight months, raising their net long by more than 11,000 contracts to 30,038. They also added nearly 2,000 contracts to their Minneapolis long, which reached 14,079 futures and options contracts.
Minneapolis wheat gained 2.4% in the last three sessions, though Chicago wheat rose fractionally and Kansas City lost 1.1%.
Traders remain focused on dry conditions in the northern U.S. Plains as well as in Canada, where farmers plan to drop overall wheat plantings by 7% on the year, a larger decline than the trade expected. Wheat prices have also been supported by their historically thin premium to corn, raising global expectations for wheat feeding.
The opinions expressed here are those of the author, a market analyst for Reuters.