NAPERVILLE, (Illinois): Speculators got caught on the wrong side of the Chicago wheat market when China began its US wheat buying spree a few weeks ago, though the situation was ripe for a short covering rally given funds’ massive net short and CBOT wheat trading near three-year lows.
In the week ended Dec. 12, money managers slashed their net short in CBOT wheat futures and options to a 17-week low of 69,529 contracts versus 96,222 a week earlier.
That included the reduction of more than 36,000 gross shorts, the most for any week since January 2018. CBOT March wheat futures finished about 1% lower in the week ended Dec. 12, but they had been up as much as 3% on huge trading volumes early in that period, and they were also coming off a 10% surge in the week ended Dec. 5.
Open interest in CBOT wheat futures and options plunged nearly 13% in the week ended Dec. 12, just two weeks after a seasonal 12% reduction. Open interest would now be considered low for the date versus near average a week earlier.
Despite the recent short covering, funds remain in their most bearish wheat position for the month in six years. Wheat futures rose fractionally over the last three sessions thanks to a 2% jump on Friday.
Speculators in the two weeks ended Dec. 12 covered shorts in Kansas City wheat at a relatively similar rate as in CBOT wheat, resulting in a K.C. wheat net short of 30,704 futures and options, tied with 2017 for the date’s most bearish.
Funds covered some shorts in Minneapolis wheat futures and options but to a significantly lesser degree than in K.C. or CBOT, and the Dec. 12 managed money spring wheat net short of 26,768 contracts remains close to the record.
Most-active CBOT corn shed 1% in the week ended Dec. 12, but short covering, likely in sympathy with wheat, turned funds into net buyers. Money managers trimmed their net short in CBOT corn futures and options to 151,570 contracts from 160,533 a week earlier.
Corn drifted a bit lower in the last three sessions as traders continue to weigh ample US stocks with decent US export demand and potential risks for Brazil’s second corn crop.
SOY COMPLEX
Most-active CBOT soybean meal futures fell nearly 2% in the week ended Dec. 12 on healthy volume, and money managers hacked away at their huge bullish bets for the second week in a row. Their net long fell to 92,720 futures and options contracts from 118,182 a week earlier. That is still considered strongly bullish, though funds have axed 24% of their gross long positions in the latest two weeks. Open interest in soymeal futures and options fell 5% in the week ended Dec. 12 and 16% in the three weeks ended Dec. 12, which started at record-high levels.
Money managers sold CBOT soybean futures and options for a fourth consecutive week, reducing their net long to 30,849 contracts from 36,633 a week earlier.