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
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
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
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.
Speculators showed less enthusiasm for raising short bets in
soybeans, even as they cut long exposure, which benefits when prices rise.
Speculators' net longs in grains and oilseeds, Sept 18, (change on week)
Chicago corn: 270,162, (-26,305)
Chicago soybeans: 209,875 (-18,944)
Chicago wheat: 60,541, (-8,433)
Chicago soymeal: 59,559, (-8,602)
Kansas wheat: 51,640, (+2,759)
Chicago soyoil: 47,768, (-5,079)
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.
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 Chicago wheat, the managed money net long sank by
8,400 lots, its quickest rate of decline since May, while in soymeal, the net
long fell below 60,000 contracts for the first time since at least the spring.
Speculators' net longs in New York softs, Sept 18, (change on week)
Raw sugar: 30,843, (-3,260)
Cocoa: 27,470, (-4,507)
Cotton: 13,014, (-3,167)
Coffee: -8,385, (+8,956)
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.