Speculators are more optimistic about the Chicago soy complex for this time of year than they have been since the commodity rally of 2007, but the soybean-driven position does not completely jibe with supply and demand fundamentals. In the week ending December 13, hedge funds and other money managers held on to net long positions in futures and options for CBOT soybeans, soybean oil, and soybean meal , according to the Commodity Futures Trading Commission.
Although the bullish positions were trimmed slightly from the week prior across all three commodities, the combined net long position of 240,682 contracts is second only to 2007 for mid-December. Soybeans account for half of this position, while soybean oil makes up the majority of the other half and sits at a record-long end of year position - 101,367 contracts in the week ending December 13.
The soybean oil position makes sense. The US Department of Agriculture projects that world soyoil stocks-to-use, a key measure of supply and demand, will fall to 5.2 percent in 2016/17. This would be the narrowest margin since 1974/75. It also helps that futures prices for soybean oil's key competitor, palm oil, are up 30 percent over the year-ago value - at the second-highest level in at least a decade.
Expectations for soybean meal supply and demand also appear to be reflected in recent speculative attitudes. World stocks-to-use for soybean meal in the current marketing year is forecast at 3.7 percent, which would be the lowest ratio since 2009/10. As such, funds' modest net long position of 18,565 futures and options contracts is very close to the 10-year mean for mid-December.
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