ao link

Farmers outwitted hedge funds in run-up to bleak Wasde

TwitterLinkedineCard

Farmers appear to have outsmarted hedge funds over last week’s Department of Agriculture Wasde report in selling hard ahead of the briefing – which sent prices tumbling - even as speculators proved keen buyers.

 

Commercial investors such as merchants and, notably, producers lifted their gross short position in Chicago corn futures and options by more than 19,000 lots in the week to last Tuesday, analysis of Commodity Futures Trading Commission statistics shows.

 

That meant the gross short, for a sixth successive week, hit its highest on data going back to 2006 – this time reaching 1.46m contracts, equivalent to about 7.3bm bushels (185m tonnes), roughly half of last year’s US harvest.

 

The figure is also unusually high for the time of year, with commercial hedging tending to peak in the summer - although with one exception being 2008, in which corn futures set a record high, and which is being seen by some investors as a potential proxy for 2021.

 

A year ago, commercial traders held a gross short in Chicago corn of less than 717,000 contracts, equivalent to less than 3.6bn bushels.

 

Funds wrong footed

By contrast, hedge funds cut their gross short position in the week to 28,427 lots, the lowest since 2012.

Their corn net long – the extent to which long bets, which profit when values rise, exceed short holdings, which benefit when prices fall – rose by 13,660 lots week on week to 358,807 contracts.

 

That represents a historically high position, if below the record of 429,189 lots set in September 2010.

 

The shifts came for a week which ended with disappointment for bulls in a the US Department of Agriculture Wasde report on world agricultural supply and demand which cut its forecast for US corn stocks at the close of 2020-21 by markedly less than investors had expected.

 

The briefing sparked selling in Chicago March corn contracts which pulled them back from a seven-year high last Tuesday, with the contract touching limit-down in the next session.

 

It remains 6.1% below pre-Wasde levels.

 

‘Look bearish’

The managed money position data as shown in the CFTC report “look bearish at face value” in showing the large extent of hedge fund buying in grains, said broker Benson Quinn Commodities.

 

Elevated fund buying is often viewed as a negative signal, in signalling little headroom left for further purchasing, and the potential for huge amount of selling should speculators be spooked into reversing course.

 

However, the broker added that the long bets “have been reduced by a significant degree since”, although adding that the data “still lean a touch bearish”.

 

The soy complex and Kansas City hard red winter wheat also attracted buying in the week to Tuesday, although managed money trimmed further its net long in Chicago soft red winter wheat, to 19,306 lots, well below the record high above 80,000 contracts set nine years ago.

 

‘Push to build a position’

In agricultural commodities overall, managed money raised its net long by 50,413 lots to 1.24m contracts in the week to last Tuesday, the CFTC data show.

 

That took the net long to within 3,700 contracts of the record high set in 2010, reflecting too purchases in cotton, and in Chicago livestock in which their net long hit a 21-month high.

 

Increases in livestock prices are being fuelled by concerns of inflation, which is prompting retailers and foodservice customers to pre-load orders, according to Steiner Consulting.

 

In the pork market, for instance, “summer hogs at $90+ imply potential belly prices as high as $160 per hundredweight,” the analysis group said.

 

“Given forward risk and limited freezer inventories, there appears to be a push to build a position.”

TwitterLinkedineCard
Related Stories

Argentine soybeans 2020-21

Agrimoney’s running wire of estimates for soybean area, production and exports from the key South American growing country

UK wheat 2021-22

Estimates for wheat production in the United Kingdom for the 2021-22 season

Dryness worries grow for Brazilian corn, sugar producers

"If the forecasted rains disappoint later this week, there is a strong possibility that the Brazilian corn estimate may be lowered"

LIVE FORECASTS – Brazil’s 2020-21 Centre South sugar crush - how did forecasters fare?

Find out how our forecasters fared when predicting this season’s Brazil Centre South sugar crush
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2021

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069