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COLUMN-Funds on brink of becoming bona-fide wheat bulls -Braun
July 3, 2017 / 6:02 AM / 5 months ago

COLUMN-Funds on brink of becoming bona-fide wheat bulls -Braun

(The opinions expressed here are those of the author, a market analyst for Reuters.)

* Funds, Chicago wheat: reut.rs/2sZTGhz

* Funds, K.C. wheat: reut.rs/2u7RyTH

* Funds, Minneapolis wheat: reut.rs/2sZTBuA

* Funds, corn: reut.rs/2svj2kf

* Funds, soybeans: reut.rs/2t01Jv9

* Funds, soybean meal: reut.rs/2svCWeR

* Funds, soybean oil: reut.rs/2u7FF09

By Karen Braun

CHICAGO, July 3 (Reuters) - Funds have nearly washed away their bearish Chicago wheat bets and are likely entering July as bulls. If true, this would mark specs’ first net long in the soft red wheat market in nearly two years.

In the week ended June 27, hedge funds and other money managers cut their net short in CBOT wheat futures and options to 10,158 contracts from 20,971 in the week prior, according to data from the U.S. Commodity Futures Trading Commission (reut.rs/2sZTGhz).

Profit-taking following the previous week’s massive round of short covering prevented speculators from further trimming the Chicago wheat position early in the week, but explosiveness in Minneapolis spring wheat futures on June 27 pulled other wheat contracts up with it, and they have been on their way up ever since.

In K.C. wheat futures and options, money managers are ending June on the most bullish note ever. They extended their net long in the week ended June 27 to 44,240 contracts from 37,701 in the previous week, and the new stance is funds’ most bullish on the hard red wheat since April 1, 2014 (reut.rs/2u7RyTH).

Funds also upped bullish bets in Minneapolis spring wheat futures and options, increasing their net long to 15,347 contracts from 12,720 in the week before. (reut.rs/2sZTBuA)

Speculators went the other way on CBOT corn, expanding their net short to 106,119 futures and options contracts from 53,825 in the week prior. They had nearly wiped clean their bearish bets around mid-month over threatening U.S. weather forecasts, but largely benign outlooks ever since have led traders to once again hit the "sell" button. (reut.rs/2svj2kf)

Wheat futures have been through the roof in the days since, though, especially Minneapolis, and funds may soon be bulls across all three wheat contracts. Drought continues to plague spring wheat in the Northern U.S. Plains, and lower-than-expected wheat acres in the U.S. Department of Agriculture’s acreage report on Friday confirmed wheat’s upward march.

Spring wheat acres in particular came in below expectations at a 45-year low and Minneapolis wheat futures have put on nearly $1 (or 13 percent) since June 27.

Trade sources suggest that June 30 was the funds’ most active wheat buying day of the year thus far, as most-active CBOT September futures settled up the daily 30-cent limit, and spot CBOT wheat traded above $5 a bushel for the first time in a year.

CBOT corn also followed wheat up on Friday, though gains were more modest under generally bearish stocks and acres from USDA. But uncertainties over conditions and weather still exist, and the weather outlook going into Monday will largely dictate the near-term direction of the corn market.

RECORD SHORTS IN SOY, MEAL

Speculators reached new levels of bearishness in CBOT soybeans and soybean meal in the week ended June 27, completely dwarfing their extension of bullishness in soybean oil. But new records are extremely unlikely next week.

Money managers expanded their net short in soybean futures and options to 118,683 contracts from 87,140 in the week prior. This surpasses the week ended May 26, 2015, for the most bearish by specs on the oilseed, and it marks only the second time on record in which the fund short surpassed 100,000 contracts (reut.rs/2t01Jv9).

Funds also logged a new all-time net short in soybean meal at 54,430 futures and options contracts, replacing the old record of 50,941 contracts set back on June 6. Soybean meal futures have struggled in recent months amid a general abundance of feed ingredients, and funds have maintained a record bearish stance for the date since mid-May (reut.rs/2svCWeR).

Soybean oil retained speculators’ overall optimism last week, as funds increased their modest net long to 10,511 futures and options contracts from 4,769 in the previous week (reut.rs/2u7FF09).

The bean oil position prevented the soy complex from overtaking the week ended June 6 as the most bearish combined fund stance of all time. Futures market activity in the days since suggests the record will be safe again for the week ended July 4, and perhaps in the longer term pending U.S. weather forecasts.

The bullish soybean stocks figures and lower-than-expected U.S. acres from USDA on Friday sent most-active November futures up 30 cents, and oil and meal followed along. Similar to wheat, June 30 may have been the funds’ most active soybean buying day of 2017.

Editing by Matthew Lewis

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