The general picture is an extension of last week, large specs and index funds are liquidating their holdings which continues to apply pressure to the combined corn/bean/wheat complex.
Large specs were modest net sellers of 5,164 contracts, which compares to last weeks net liquidation of nearly 32,000.
Index funds were the big sellers, liquidating 25,114 contracts of the combined commodities in the week ended Tuesday. Throw in the prior week’s selling of nearly 48,000 contracts, which ended an 8 week run of buying, and they’ve sold nearly 73,000 contracts in two weeks. Not good.
In looking at spec holdings as a percentage of total open interest, as we mentioned last week, none of the positions are extreme. Spec pressure moving forward could be in either direction based on how the fundamental and technical pictures shift for each individual commodity.
Corn
Large specs were buyers again this week, a moderate net 15,737 contracts. Since the July 9 trough at short 321,081, large specs have been buyers all but 4 of those 15 weeks, reducing their net short by a whopping 238,949 contracts. We hate to bring this up, but the price of the most active corn contract from that week to this is only 8¢ higher. Of course over this time frame farmers sold the most corn in history (from June 1 to Sep 1 Stocks reports), and also harvested a significant portion of the new crop. Over this same timer period commercials have net sold 228,458 contracts, while small traders have sold roughly 33,000 contracts and index funds have bought roughly 18,500.
The takeaway here is the it appears last weeks large spec net selling may have just been a break in the longer trend of net buying, which we hope to continue to see. More important is how they did this. This week saw the first big jump of new long positions, in fact the last time large specs added this many new long positions was the week ended January 17 2023.
Soybeans
Not what the soybean bulls wanted to see…an end to new long position building, and a third straight week of increased short positions. This nets out to the second straight week of net selling to the tune 18,707 contracts in the week ended Tuesday. This follows net buying in 9 of the previous 12 weeks that saw large specs reduce their net short by 135,210 contracts.
Soybeans are in a tenuous spot. Fundamentals are largely bearish though this is known and should be built into today’s price, but there is no law stating bearish fundamentals cannot become more bearish. If that were to happen, large specs are in a position to both add to existing short positions and liquidate their recently established long positions. If most active January were to break through the $9.75 level this could get real ugly real fast. The good news is as of now we do not think that will happen.
Wheat
Another week of wheat trying to get me to my weekend quickly but not giving us much to talk about. Large specs were modest sellers, commercials modest buyers and funds relatively sizable sellers.
If you think index funds being sellers of nearly 5,000 contracts isn’t exciting, consider that this was their largest move in either direction since July 2. Fireworks indeed.
