Farmers have been selling soybeans at a record pace into the rally spurred by fund buying, according to regulatory data, which also show speculators’ net long in ags overall topping 1.0m contracts for the first time since 2014.
Commercial investors’ gross short position in Chicago soybean futures rose by more than 50,000 lots in the week to last Tuesday to nearly 700,000 contracts, according to analysis of data from the Commodity Futures Trading Commission.
That represented the highest short holding by commercial investors – in the main producers in this case - on data going back to 2006, and is equivalent to nearly 3.50bn bushels (95m tonnes).
That in turn is equivalent to most of the US harvest of 4.3bn bushels this year, although with much Chicago selling said to be based around Brazilian sales too.
‘Best prices in three or four years’
The enthusiasm for selling soybeans forward reflects elevated prices for a harvest which, while expected to come in 115m bushels short of the record high two years ago, is still historically strong.
“Producers have been looking at their best prices in three or four years,” with the November contract even after its tumble on Monday up more than 20% from an August low, Brian Henry and Benson Quinn Commodities said.
“The crop is coming off in relatively good condition, and there are good basis levels for the most part,” with commercial buyers paying up for supplies.
“All that means that there are beans for sale,” he told Agrimoney, noting too the logistical saving to farmers of selling straight from the combine rather than having to store crop first.
‘Never got that sexy’
Prices of corn, meanwhile, which growers are also harvesting “have never really got that sexy,” Mr Henry said, noting “a lot of $3.30-3.50 a bushel cash corn”.
The gross commercial on Chicago corn futures and options as of last Tuesday, at 906,494 contracts, the highest in 14 months, remains some 140,000 contracts short of a record high.
Corn is also viewed as an easier crop to store than soybeans, which are more vulnerable to spoilage from, for instance, moisture.
Farmers vs funds
The soybean selling by producers has come at a time of enhanced hedge fund interest in the oilseed, with the managed money net long in Chicago futures and options rising by 9,351 contracts week on week to 238,394 contracts in the week to last Tuesday, the CFTC data showed.
That was the largest net long since the US drought year of 2012, but remained short of the record high of 253,889 contracts set in May that year, a figure which many investors had expected to be broken in the latest CFTC data.
“I had expected a record figure,” Mr Henry said, while at Futures International, Terry Reilly said that net longs fell short in the briefing “for all five commodities” – corn, soft red winter wheat, soymeal and soyoil as well as soybeans.
In corn, the net long of 134,466 lots remained at less than one-third of the record high, set 10 years ago, with that in wheat well below historic peaks too.
Historically high levels of fund purchases are often seen as a negative for prices, in signalling that speculators are running out of ammunition for long bets. By contract, extensive producer short positions are viewed as supportive, in meaning that there is less unfulfilled selling pressure yet to come.
‘Run out of sugar’
Nonetheless, with funds having purchased notable levels of soft commodities and livestock, as well as grains, their net long in the top US-traded livestock contracts overall rose above 1.0m lots in the week to last Tuesday, for the first time since May 2014.
Among New York-traded soft commodities, raw sugar continued to be in demand, with managed money raising its net long in futures and options to 212,687 contracts, the highest in nearly four years.
“A month ago we were expecting spot demand, which has been very high all year, to start to decrease, and so to leave the market with a comfortable surplus going in to 2021,” said Robin Shaw at Marex Spectron.
“That expectation proved an illusion, for whatever reason, so now we are faced with a 2021 sugar year where, if everything goes normally, we should have enough supply to meet demand.
“But if we lose a few million tonnes for whatever reason, we could literally run out of sugar.”