Weekly COT Highlights – Week Ended Tuesday, January 13
Main Takeaways this Week
- Soybean – UGLY
- Rice and Wheat – Very bullish setup.
- Cattle Complex – Beware
Not only are we back up to speed with COT reports, this one includes Monday’s massive trading day in which the USDA sent several markets tumbling, so insights from today hold extra importance. In the broader picture, large speculators were net sellers of the CBW complex, though they were modest buyers of SRW, which we feel is making a real honest to goodness bottom now.
Corn
No surprises here. Add 1.3 million acres and 0.5 BPA and specs are gonna sell corn, and they did. What IS surprising is that index funds were net buyers of corn, adding 20,000 longs to their already sizable position.
Given all of the above and corn resistance to “staying down” after the report (see lead story quote), things actually look okay for America’s favorite crop. Large spec / commercial positions don’t scream anything at us. But index funds coming in as net buyers this week is a strong sign that they may believe the August lows will hold. Time will tell.
Soybeans
WOOF. Large specs were again massive sellers, have crossed the net zero line, and now sit short 16,388 contracts. They’ve been sellers for 6 consecutive weeks, totaling 177,754 contracts, an average of nearly 30,000 contracts a week.
That’s the bad news, the worse news is they are still about 175,000 contracts shy of their record net short established roughly 2 years ago. This really does not look good for beans.
On the bright side, futures stabilized after the report and held above some key chart support. They also broke some key support, and did not continue lower, also a positive sign. In fact, March futures closed Friday just 5¢ below last week’s close, the last day before the report, so not much damage has been done this week.
Wheat
BULLISH. This looks great, and to be frank, its about the only thing that looks to be working in wheat’s favor after months of bearish USDA reports starting in August. Large specs were net buyers in the week ended Tuesday, which is almost shocking to type out considering what happened to corn and beans over this time frame. Large specs’ net position is massively short, an area that has stopped selling in the past and led to sizable bounces, even rallies.
Futures aren’t far off their contract lows. Given the onslaught of bearish news, this bullish setup, and a nearby exit point if wrong, you may see a wheat buy recommendation in the BIS Spec newsletter next week.
Don’t miss our deep dive on wheat in this week’s Brock Report, page 3.
Cotton
More of the same. A bullish setup, sustained large spec buying, and a failure to launch futures. Pretty mild week, but we’ll point out that Cotton was about the only crop USDA didn’t take a crap on Monday. Pardon the language.
Rice
BULLISH. As stated last week, this is an extremely bullish setup, like wheat. Futures are also depressed, like wheat. And you should be alert for a BIS Spec Recommendation to buy rice next week. Marketers, be patient. We don’t know what the bullish story is going to be, but there is certainly more upside potential than downside risk in this market.
Soybean Meal
After seven consecutive week’s of net selling totaling -58,014 contracts large specs were net buyers of 14,111 contracts this week. As stated last week, we advised feed buyers to procure 50% of second quarter needs a couple weeks ago and admitted this was a bit early, particularly in light of this spec selling. Given that this selloff has continued, with March futures now just $5 off their contract lows, be very alert for recommendations to make more significant purchases in the next week or two.
While the overall positioning snapshot doesn’t tell us much we know this: Specs sold a ton and pushed the market to near contract lows, and they weren’t sellers this week. The move lower may be over, nothing confirmed yet.
Lean Hogs
See-saw in activity from large specs = see-saw in prices. You know we love the lean hog COT more than most, and if you follow the blue and red lines recently below you see why.
Large specs were modest sellers in the week ended Tuesday, but I’d bet the farm they come in as net buyers in next week’s report as futures charged higher Wednesday through Friday. Given that large specs are so far from their resent net long of 100,000+ contracts, we’re concerned they could continue buying and pushing this market higher. Don’t step in front of this until a sell signal is given.
Cattle Complex
What an absolutely insane market. The red lines below will be written about in history books.
In the fats large specs were pretty aggressive buyers, their largest week of net buying since 10/14. We would note that they then went on to sell the next seven consecutive weeks, so let’s not get too comfortable here.
In feeders large specs were very modest net sellers, and this follows six consecutive weeks of net buying. Very mixed setup here but it is something to watch. My main takeaway is that large spec feeder selling was the earliest warning sign of the most recent collapse in futures, and it might be again. If they come in as sellers next week, that will be a major red flag. It may also be too late by then.
We took decisive action Friday establishing hedge positions, and many contracts did post a key reversal down. Beware of this market.
