The fierce selling by funds of Chicago crops has met with a barrage of buying by commercial operators – solving one market puzzle, but potentially creating another in appearing to downplay the extent of farmer sales.

Investors have questioned how open interest levels – the number of live contracts in place - have remained relatively stable in Chicago corn and soybean futures despite the selldown by funds which has fuelled a slump in prices.

Benchmark December corn futures stand some $1 a bushel below their high last month, with November soybeans down some $1.50 a bushel from an early September peak.

 "The market has struggled to explain this massive fund liquidation with open interest only nominally changed," Kim Rugel at Benson Quinn Commodities.

In the week to last Tuesday, open interest fell by a relatively small 11,000 contracts in soybeans and rose by nearly 30,000 lots in corn, regulatory data late on Friday showed.

Funds vs commercial buyers

However, the stability was reflected in part in corn by extra short positions taken out by managed money, a proxy for speculators, which raised its short bets – which profit when prices fall – in futures and options to the highest since early July.

Furthermore, end users appear to have slapped on substantial coverage, more than outweighing sales through derivatives by farmers, whose selling pressure has been seen as a key weight on markets.

In corn, commercial investors, which covers both commodity users and producers, cut their overall net short position by more than 26,000 lots, and in soybeans by nearly 30,000 lots, the data from the US Commodity Futures Trading Commission showed.

The statistics show "that the fund liquidation was answered with commercial buying and that commercial harvest pressure was probably not the selling that triggered the fund liquidation", Ms Rugel said.

However, a UK grain trader told Agrimoney.com that harvest pressure "is going to get funds in a selling mood" even if not reflected in futures position dynamics, which also in turn excluded cash market sales.

Broad sell-off

The CFTC data showed speculators continuing to slash net long positions in a range of crops, extending a wave of liquidation reflecting both broader market concerns and crop-specific factors.

In New York, cotton also had its worst week since May, in terms of the rate of decline of speculators' net long position, with cocoa suffering its biggest change of sentiment since April.

In sugar, for which prices returned near two-year lows last week, managed money cut its net long position to a three-month low.