Weekly COT Highlights – Week Ended Tuesday, August 25
Large speculators added 147,003 contracts to their combined corn, soybean, and Chicago wheat position this week, increasing their net long to 264,721 contracts. The move was led by corn, where funds added 117,711 contracts, while soybean and wheat positions increased by 23,565 and 5,727 contracts, respectively. Reflecting increasingly bullish sentiment across the grain complex as funds continue to build long exposure in corn and soybeans while steadily reducing bearish wheat bets.
Main Takeaways this Week
- Corn: Specs Hit the Gas.
- Soybeans: Spec Buying Continues.
- Cotton: Bulls are All-In.
- Lean Hogs: Record net short once again.
Corn
Last week we said “specs hit the gas” and “went all in”, well this week they REALLY got after it. Large specs were net buyers of 117,711 contracts, the most since March, and sent futures into new contracts highs across the board in the process. They did so through both aggressive new long position building and short liquidation, even specs don’t want to be short in a bull market.
Though we should be cautious in calling this a bull market, as that implies further upside. While that is certainly possible, we need to issue a word of caution over the next few weeks. Two charts below is an additional chart, a “Long Term” look at the usual chart immediately below. We include this to show just how frequently large spec net buying stalls out around the +200,000 contract mark. The only time specs extended beyond net long 300,000 contracts was early on in the Russia/Ukraine conflict.
Also keep in mind: This data is through Tuesday of this week. A significant number of new longs have been established above $5.00. You could read this as conviction of a higher move from big money traders, or a risk that a reversal will cause immediate long liquidation and cause a sharp correction. Both are valid arguments, and both could turn out to be right.
Given the seasonality and our prediction that this market will peak right before, during or after harvest, and the bottom line is that this all works together to support a top in this market could very well occur in the next few weeks.
Soybeans
While not as aggressively as in corn, specs were also buyers of soybeans this week. They bought 23k contracts this week and have been net buyers of 148k contracts since June 30. Important to note that this data is through Tuesday, and November futures finished the week 56¢ above their Wednesday low. There was certainly a lot of spec buying in that time frame. We anticipate specs will come in at net long ~140k-150k contracts in next weeks report barring a massive selloff Monday and Tuesday.
That puts soybeans specs in the same boat as corn specs: nearing historically large net longs, and presenting a long liquidation risk.
But timing is always the hard part. Both in the case of corn and soybeans, specs are not at absolute extremes, yet. Each instance is unique regardless. We are not yet ready to issue a “Red Flag” warning, but we are certainly getting close. If we see soybeans specs near the net long 200,000 contract mark, that will be the time.
Bottom line for both corn and beans is specs are still rushing in the front door and driving prices higher in the process. This is great while it lasts, but the reversal can be an inverse thrill. I
Soybean Meal and Oil
Large speculators increased their net long soybean meal position by 8,515 contracts to 75,762 contracts this week. Fund buying was driven primarily by short covering, with speculative short positions dropping to their lowest levels in more than a year while long positions held near recent highs. The resulting net long is among the largest of the past several years, reflecting continued bullish sentiment despite meal prices remaining well below the highs seen in recent years.
Large speculators reduced their net long soybean oil position by 7,750 contracts to 57,422 contracts this week. While funds have been liquidating longs from the record net long established earlier this year, they remain firmly bullish from a historical perspective. Commercials increased their net short position as the market continues to work lower from spring highs, suggesting some speculative enthusiasm has cooled but overall fund ownership remains supportive to prices.
Wheat
Large speculators shaved 5,727 contracts off their net short Chicago wheat position this week, leaving them net short 41,603 contracts. Most of the change came from new buying, with specs adding 5,847 long positions during the week. It’s not a major shift in sentiment, but most of wheat’s rally occurred after the Tuesday COT cutoff, meaning much of the recent strength isn’t reflected in this week’s data. Given the late-week price action, there’s a good chance specs further reduced their bearish stance and could post their smallest net short of the move in next week’s report.
Cotton
Large speculators added 10,585 contracts to their net long cotton position this week, pushing their net long to 96,151 contracts. Specs continue to aggressively add length, with long positions climbing to another fresh multi-year high while short positions have fallen to their lowest levels that we have charted. The current net long is approaching the 2021 record of 103,162 contracts, highlighting just how bullish speculative sentiment has become as cotton prices continue to recover from this year’s lows.
Rice
Once again there was little to note in the rice market this week, with large speculators adding 743 contracts to their net position.
Lean Hogs
Large speculators added another 6,125 contracts to their net short lean hog position this week, pushing their net short to a new record of 63,770 contracts. Funds continue to build bearish exposure as hog prices remain under pressure, with speculative short positions climbing above 100,000 contracts for the first time ever. With fund sentiment now at an all-time bearish extreme, the hog market remains one of the most heavily sold livestock markets on record, and is over due for a short covering rally.
Cattle Complex
Large speculators trimmed 5,804 contracts from their live cattle net long this week, reducing their position to 26,054 contracts. Interestingly, specs added new long positions for the first time in nine weeks, but the increase was more than offset by additional new short selling. While the headline position continues to move lower, the return of long-side buying is noteworthy given that most of the decline in fund ownership over the past two months has come from long liquidation rather than aggressive short selling. Typically, the willingness of specs to begin adding new longs again could be an early indication that bearish conviction is fading, but the fact that the new longs were over powered by fresh shorts tells us that live cattle specs may be looking to get even more bearish.
Large speculators trimmed 2,556 contracts from their feeder cattle position this week, pushing them to a net short of 10,108 contracts. Most of the change came from new short selling, with speculative long positions holding relatively steady near recent levels.
