(The opinions expressed here are those of the author, a market analyst for Reuters.)
By Karen Braun
FORT COLLINS, Colo., May 5 (Reuters) - Heavy world stocks, trade conflicts, and demand disruptions have led speculators to end April on a record bearish note across Chicago-traded grains and oilseeds, and a sharp reversal in investor attitude anytime soon seems unlikely.
When combining money managers' net positions in CBOT corn, wheat, soybeans, soybean meal, soybean oil, along with Kansas City and Minneapolis wheat, the overall net short reached 683,501 futures and options contracts as of April 30, up from 656,078 a week prior, which was the previous record. (tmsnrt.rs/2LqH2DO)
The agriculture market has been grappling with record U.S. soybean stocks and rising corn stocks, an excellent U.S. wheat crop, and strong export competition among major world suppliers for all three products. Feed demand in China, which imports massive quantities of soybeans for its hog herd, has recently been disappointing as the country is battling an outbreak of deadly African swine fever.
Market participants have been hopeful that a potential trade resolution between the United States and China might be able to cure tumbling CBOT futures, but those hopes were blasted on Sunday as U.S. President Donald Trump ratcheted up tensions by saying he would hike U.S. tariffs on Chinese goods this week.
This comes after many months of headlines saying the trade talks were going well and that a resolution could be reached soon. Beijing was unimpressed with Trump’s ideas and as of late Sunday night, China’s Vice Premier Liu He was considering cancelling his planned trip to the United States this week to continue trade talks. Markets reacted harshly to this news. Early in overnight trade from Sunday to Monday, July corn futures were down as much as 15 cents per bushel and July soybeans dropped up to 20 cents.
Drier forecasts for the U.S. Corn Belt heading into mid-month also weighed on futures overnight. Heavy, persistent rains have halted a large portion of U.S. fieldwork, causing concerns that the corn crop may not get planted to full intentions.
In the week ended April 30, hedge funds and other money managers cut their net short position in CBOT corn futures and options to 306,699 contracts from a record 322,215 in the prior week, according to data from the U.S. Commodity Futures Trading Commission. (tmsnrt.rs/2DPjxhe)
On the other end of the spectrum, producers cut their net long in corn to 12,527 futures and options contracts from a record 47,097 a week earlier. This is only the fourth week ever, and fourth in a row, that producers held a bullish stance in the yellow grain, and this continues to cap rally potential should funds decide to cover their short positions.
Wet weather across the U.S. Corn Belt has delayed the planting of the crop in many key states such as Illinois. This led to a modest rise in CBOT corn futures from Wednesday through Friday, and commodity funds were presumed to be straight buyers of the grain during that time.
Meanwhile, funds were likely straight sellers of CBOT soybean futures over the last three sessions. Significant planting delays for U.S. corn can often lead to a rise in soybean plantings, which along with the U.S.-China trade war and record stockpiles did not create positive sentiments among investors.
Through April 30, money managers' net short in soybeans hit a new record of 148,526 futures and options contracts. That compares with 129,566 contracts in the previous week, and that was a record at the time. (tmsnrt.rs/2DQMhq2)
Similar to corn, producers are loaded up on soybeans, which would not be supportive of a drastic futures rally should fundamentals unexpectedly turn positive. Producers’ net long in soybean futures and options rose to 69,145 contracts from 63,510 a week earlier. The new position is about 10,000 contracts below producers’ record net long.
Funds also hit new record bearish bets in Kansas City wheat futures and options through April 30. The net short of 58,494 contracts is up from 53,673 in the previous week and tops the old record of 54,295 contracts set two weeks earlier. (tmsnrt.rs/2DPk2I8)
K.C. July wheat futures rose nearly 2 percent over the last three sessions after Tuesday’s contract lows, but they had fallen back down near those lows early in Sunday night’s trading.
Money managers extended their net short in CBOT wheat futures and options to 83,502 contracts through April 30, their most bearish wheat view in 15 months. They also added 43 futures and options contracts to their net short in Minneapolis wheat, which hit 12,609 contracts. That is funds’ most bearish spring wheat stance since July.
Speculators’ moves in the soy complex through April 30 were not very dramatic. Money managers extended their net short in soybean oil to 58,072 futures and options contracts from 50,637 in the previous week, and they cut their net short in soybean meal to 15,599 contracts from 19,429 a week earlier.
Trade sources predict that commodity funds were net buyers of CBOT wheat, net sellers of soybean meal, and straight sellers of soybean oil between Wednesday and Friday.
Editing by Tom Hogue