US corn and soybeans are facing more difficulties this growing season than the last couple of years, and although it is clear that complete disaster is not in the cards, there is just enough supply uncertainty to keep the funds cautiously bullish in Chicago-traded grains and oilseeds.
The US Department of Agriculture cut corn condition scores for the fourth week in a row last Monday, but 61 percent of the crop is still considered in good or excellent condition. And even though the 59 percent good-to-excellent soybean score is the lowest for the date in five years, last week marked the first rebound in conditions in six weeks.
The weather forecast through mid-August - the month in which soybean yield is most impacted by weather - is largely non-threatening with no significant heat and possibly sufficient rainfall, making it harder for funds to defend the long view.
In the week ended Aug. 1, hedge funds and other money managers cut their net long position in CBOT corn futures and options to 84,644 contracts from 106,815 the week prior, according to data from the US Commodity Futures Trading Commission.
The reduction in the corn long was primarily the result of selling, but there were actually more buyers in the week ended Aug. 1 than the week prior, perhaps indicating some uncertainty among speculators over how much smaller the US corn crop might become than the government's current estimate.
Across the soy complex, the expansion in spec enthusiasm has halted for the first time since the streak began in the last week of June. The spec CBOT soybean long was reduced to 39,795 futures and options contracts from 50,885 the previous week. This is the least optimism that funds have had on the oilseed at the close of July since 2014, when they were about 10,000 contracts net short.
Money managers continued to lengthen their long position on CBOT soybean oil, which now stands at 67,913 futures and options contracts. The increase from 62,628 contracts the week prior was the smallest such weekly move since funds turned bullish on the vegoil in mid-June.
CBOT soybean meal remains the only commodity on which funds are bearish. They slightly extended their net short to 7,414 futures and options contracts from 4,381 the week prior, but they reduced both their outright longs and shorts in the process.
Speculators are still hanging onto bullish positions in wheat, even though all three futures contracts have been on the downtrend since mid-July. Most-active Chicago September contract is already down more than 20 percent ($1.20 a bushel) since its July 5 peak.
Funds cut their net long in Chicago wheat for the third week in a row in the week ended Aug. 1. They are now 12,190 futures and options contracts net long versus 27,980 contracts in the previous week. The recent trend in spec sentiment follows very closely to that of 2015 both in direction and magnitude. The Chicago summer wheat rally of 2015 amounted to 25 percent while the 2017 one topped out around 20 percent, and the duration and timing - mid-June to early July - was very similar.
Money managers are hesitant to let go of their record bullish bets for the time of year in K.C. wheat, as they modestly reduced the position to 54,187 futures and options contracts from 60,655 the week before. The net view on Minneapolis-traded wheat was materially unchanged for the third week in a row as funds ever-so-slightly extended their long to 10,808 futures and options contracts from 10,705 the week prior. Commodity funds have been net buyers of corn and soybean oil, but net sellers of wheat, soybeans, and soybean meal in the days since.