Speculators slashed their net long position in wheat despite
concerns over the poor condition of the US crop, beset by dryness which shows
no sign of relief any time soon.
Managed money, a proxy for speculators, cut their net long
position in Chicago wheat futures and options by more than 18,000 lots to a
little over 32,000, data from the Commodity Futures Trading Commission said.
The decline to the lowest net long position – the advantage
of long positions which benefit when prices gain over short holdings which
profit when values drop – since the latest rally kicked off in June came
despite a continued deterioration in the condition of the US crop.
The proportion of US winter wheat seedlings rated in "good"
or "excellent" health set a new seasonal low as of Sunday, falling 1 point week
on week to 33%, the US Department of Agriculture said.
'Issues merit some attention'
And the dry conditions look set to remain in place, with no
significant rain forecast over the Plains hard red winter wheat regions which
represent the epicentre of crop concerns, including the likes of Kansas, the
top US wheat-producing state
"There hasn't always been a tight correlation between poor fall
ratings and poor production, but the current issues merit some attention as
there are few signs that the weather pattern is ready to shift," Brian Henry at
UK broker Benson Quinn Commodities said.
|Speculators' net longs in grains and oilseeds, Nov 20, (change on week)
Chicago corn: 250,228, (+47,375)
Chicago soybeans: 112,790 (-13,059)
Kansas wheat: 40,731, (-6,173)
Chicago wheat: 32,050, (-18,445)
Chicago soymeal: 27,526, (-1,853)
Chicago soyoil: -53,421, (-9,281)
Sources: Agrimoney.com, CFTC
Commerzbank, flagging "overly dry" conditions on the Plains,
said that "meteorologists are predicting no change in the weather over the next
"If it remains too dry, the risk of soil erosion and frost
damage will increase."
Such forecasts might be expected to encourage increased long
positions by speculators, and Commerzbank noted the weather's impact on giving "buoyancy
to the prices on the US exchanges".
Speculators' net longs in New York softs, Nov 20, (change on week)
Cocoa: 34,063, (+6,359)
Raw sugar: 18,955, (+6,163)
Cotton: -12,522, (+6,805)
Coffee: -26,921, (-291)
Sources: Agrimoney.com, CFTC
However, even in the Kansas exchange, which trades the hard
red winter wheat most at risk, speculators also cut their net long position.The positioning reflected in part a broader withdrawal by
funds of cash from agricultural commodity markets, with speculators historically
unwilling to hold on to large net long positions in wheat for extended periods,
There was also limited evidence yet of import demand
switching to the US as Black Sea and European supplies run low.
Also, "it is still early days to be getting too worried
about the US crop. It recovered nicely from a poor start last season," a UK
grain trader told Agrimoney.com.
'Greatly in need of moisture'
The decline in the condition of US wheat in the latest week
reflected broad declines, in seedlings in both Plains hard red winter wheat
states and the Midwest, which grows the soft red winter wheat traded in
Chicago, but where crops remains in good health.
In hard red winter wheat state of Texas, the proportion of the
crop rated "good" or "excellent" tumbled nine points to 21%.
Wheat condition in selected states, and (change on week)
Oregon: 61%, (+22 points)
Missouri: 53%, (-6 points)
Kansas: 29%, (-1 point)
Texas: 21%, (-9 points)
Colorado: 18%, (-1 point)
Nebraska: 14%, (-3 points)
South Dakota: 2%, (-2 points)
Data: % rated good or excellent. Source: USDA
"In many areas, small grains were greatly in need of
additional moisture. Some fields had failed to germinate and others were showing
signs of drought stress," USDA scouts said.
In Kansas, "producers experienced another week of warm,
windy, and dry weather", while in South Dakota "winter wheat emergence has progressed
slowly as some areas lack moisture".
Only 2% of South Dakota winter wheat is deemed in "good" or "excellent"
health, with only 60% emerged, compared with 100% usually by now.