In the week ended Tuesday October 10 Large Speculators continued their net buying campaign of Corn, Soybeans and Wheat, to the tune of a 64,197 contracts. Index funds also maintained this trend, adding a net 35,582 contracts, while commercial hedging balanced out the board, roughly doubling their net short position as sellers of 86,219 contracts in total.
Large speculators appear to be moving to the sidelines, which is a good thing for producers as they held a huge net short across these three commodities. Corn and wheat saw both long and short liquidation, while soybeans saw short liquidation and some new longs entering the market for the third consecutive week.
In looking at large speculator share of open interest, the most extreme positions are 24% large spec shorts accounting for 25% of the total open interest, spec shorts are 20% of cotton OI (Down from 33% a several weeks ago which is why we warned of a potential rally in cotton despite the fundamentals), and long 20% and 23% of the meal and rice market respectively. A significant long position is bearish, and a significant short is bullish, color coded accordingly above.
Corn
Things are going as expected. After a one week hiatus in a liquidation event that started 8/20, large specs were major net buyers again in the corn market, reducing their short by 34,168 contracts to -97,165. All indications are that specs just want out of this market as we approach harvest. The shorts are happy to take what are more than likely significant profits, and the longs don’t want to wait around to see more strong yield reports and commercial hedging pressuring prices. Three charts down shows this clearly, they are just exiting their shorts faster than longs.
Commercial hedgers, to beat a dead horse, will continue to pressure the market as harvest picks up, and October is when we will see the greatest harvest pressure with roughly 50% of the crop harvested on average this month, and ideal conditions for fieldwork across the Midwest. By mid November commercial selling should slow down. For those of you who like to watch Crop Progress, please note that on Monday afternoons we post a Crop Progress chart dump like this one, so be sure to login on the app or website as it will be posted prior to 4pm. Commentary and analysis of the key condition and progress changes are of course noted in Monday’s Closing Daily Market Comments. These graphics and others are also always available in “Infographics”, located here.
It feels like time may be running out in regards to specs and funds holding this market up. There’s probably several more weeks of large spec short liquidation ahead, possibly at a slower rate, but Index Funds currently sit with combined F&O net long of 288,052 contracts. This is their largest holding since May 14 at ~315k contracts, and their average position of ~341k contracts since March of 2011. They’ve added 73,000 contracts since their all time smallest holding on August 13, and are just 52,960 contracts from their average holdings, and there is nothing to suggest they need to return to or beyond those levels. But the trend is your friend. Considering the size of this rally and late week price weakness, be alert for cash sale or hedge advice.
Soybeans
Large specs continue to hammer this market to the upside, this week covering just under 26,000 contracts, and marking the 6th consecutive week of net buying that totals 108,090 contracts since 8/27. This is a move we called out in advance, saying that bean specs do as the corn specs do, but a week or two delayed. Still, this represents over 540 million bushels of buying. The last two weeks alone represent over 315 million bushels. As big as those numbers sound, let’s also remember that producers have or are about to cut over 4 billion bushels from the field.
Index funds were also net buyers, although modestly so compared to large specs, just 5,891 this week.
Commercials nearly matched the specs contract for contract as net sellers of 25,969 contracts due to harvest pressure.
As in corn, a rally of this size is something we want to reward before giving too much of it back. The low of last Friday’s outside day up is $10.34 1/4, if we breach that you can expect an advice alert from us. If you are not at our recommended levels, consider small catchup sales.
Wheat
Large speculators were modest buyers, reducing their short position by 4,041 contracts, their 5th week of buying out the the last 7 weeks, for a total net short reduction of 15,936 contracts. As previously pointed out, wheat goes where the specs go, at least since mid 2022 as you can see immediately below. The large spec graphic three below shows that we are now in the 5th consecutive week of both short and long liquidation as speculators move to the sidelines.
Commercial hedging has continued for the 6th straight week and 8 out of the last nine weeks for a total net selling of 43,147 contracts since July 30. Spring wheat harvest was not reported in this week crop progress report, so we take that to mean it’s 100% complete, but it doesn’t feel right for the USDA to ghost us like that. Index funds were modest buyers.
Prices action in the wheat is similar to that of corn and beans. We’ve watched the market rally, all three wheat classes challenged their early July highs Wednesday only to fail and trade lower Thursday and Friday, as is marked in The Brock Report. Sitting just above key trendline support, be alert for cash and hedge recommendations if prices continue to slide next week.
