NAPERVILLE: The US Department of Agriculture last week made one of its most surprising tweaks ever to the domestic corn harvest, though it turns out that speculators were ready.
In the week ended Jan. 7, money managers increased their net-long position in CBOT corn futures and options to 253,346 contracts from 228,806 a week earlier.
That marked their most bullish corn stance since Nov. 1, 2022.
CBOT corn futures were largely unchanged during that week, though they have jumped 4% since, on Monday hitting the highest levels in just over a year.
USDA on Friday slashed US corn yield by a hefty 3.8 bushels per acre from the previous estimate. On a per-bushel basis, the average trade estimate was the furthest from the actual in at least a quarter-century.
Corn had already been strengthening in recent months on robust demand, whittling 2024-25 US ending-stock estimates.
Those fell again on Friday, and stocks are now seen 27% lower than originally projected last May.
Some industry participants have suggested that the elevated bullishness of the funds is actually a bearish factor for corn prices because the market could be prone to sharp selloffs, and this is indeed a risk.
However, bullishness can sustain if the conditions are right.
Speculators held a net long in corn from September 2020 to March 2023, when US stocks-to-use hovered between 8.3% and 9.9%, below average levels, for three consecutive marketing years.
USDA estimates 2024-25 US corn stocks to use at a close-by 10.2%.
While not impossible, sustaining these thinner ratios into 2025-26 would take a series of events such as weather problems in South America, then weather problems at home, and so on.
Speculators’ previous bullish run came when China was active in the US corn market, which elevated US exports somewhat artificially against tighter supply levels.
China has not bought significant volumes of US corn in nearly two years.
Soy bears
US soybean production also fell significantly below trade expectations on Friday, and US stocks-to-use for 2024-25 is nearing the year-ago levels.
A few months ago, stocks-to-use had been seen rising 50% on the year.
Funds had been covering short positions in the couple of weeks ahead of the USDA report, but they remained reasonably bearish as of Jan. 7 with a net short of 28,612 CBOT soybean futures and options contracts.
That is a 13-week low and compares with 42,447 in the prior week.
Most-active CBOT soybeans rose 5.6% in the latest four sessions, reaching three-month highs on Monday.
Traders are weighing lighter US supplies and continued dry weather in Argentina against a big crop projection in Brazil.
CBOT soybean oil exploded 11.5% over the last four sessions as upcoming clean fuel tax credit guidelines are expected to limit domestic competition for U.S soyoil.
That may have churned stomachs of money managers, who through Jan. 7 extended their net short in CBOT soybean oil futures and options to a 16-week high of 31,999 contracts, up more than 3,000 on the week.
Despite 4.2% losses in CBOT soymeal futures in the week ended Jan. 7, money managers trimmed their heavy net short to 58,624 futures and options contracts from 64,942 a week earlier.
Soybean meal climbed another 1.4% over the last four sessions, potentially as the soy crop in top meal exporter Argentina hangs in the balance. Forecasts late on Monday suggested significant rainfall could still be another week or more away.
Karen Braun is a market analyst for Reuters. Views expressed above are her own.
Comments