The last two months have seen large specs rapidly reduce their short exposure to corn, soybeans and wheat. In the week ended 9/17, they took a break from short covering and were net sellers of 5,627 contracts, a very modest change in position. Commercials continued selling, to the tune of 12,940 contracts as we has repeatedly said they would, and index funds were very small net sellers of 1,261 contracts. Again, non-reportable or small traders surprised us, this week coming in as net buyers of 19,829 contracts. A huge move that we frankly cannot explain. Our fear right now is that with specs and funds showing signs of slowing down their purchasing, as we enter the heart of harvest they will be even less inclined to cover shorts or add longs. Not a great sign but far from a flashing red light.
Corn
You’ll notice an additional bit of information on the charts below showing the net change of the three main categories of trader we cover here. Large specs were significant net sellers to the tune of 20,145 contracts, while commercials were surprisingly net buyers and index funds moderate buyers. Commercial buying could be the result of the market considering that a low is in, and after a downdraft of this scale, why not step in and start covering some needs. With harvest picking up we do not expect to see commercials be net buyers again for some time, but we’ve been wrong before.
Small traders found something to fancy in the corn market, as they were net buyers of 14,025 contracts, just a week after being net sellers of 20,366 contracts. These are not unheard of moves in terms of scale, but they are at the very high end. The last time this category changed net position by more than 20,000 contracts in a week was in April of 2023. We’re not sure this tells us anything useful but it is interesting none the less.
Soybeans
There is no signs of specs slowing their short covering, as they reduced their net short position for the fourth consecutive week, to the tune of 9,273 contracts in the week ended Tuesday. Zooming out to four weeks ago, specs have reduced their short by 45,000 contracts on the nose in this time frame. It is worth noting that soybeans only gained 30 cents over this time frame. You could argue whether that is good or bad for that amount of short covering, but the bottom line is it’s better than a stick in the eye, and pretty positive to see that price action ahead of harvest. Commercials were again and as we expected sizable net sellers while index funds were modest net sellers.
Looking at price action, the $10 level was tested Friday but Nov. futures closed well off of their lows. While we think a bottom is in this market, and likely will not be looking to advance cash sales at this time of the year, we will very likely establish some additional hedge protection if Nov. closes under $10 by a solid margin.
Wheat
Large specs were buyers again for the third consecutive week, and 4 of the last 5 weeks. Commercials were net sellers of 5,754 contracts and index funds net sellers of 1,634 contracts. Chicago wheat rallied just 1.5¢ over the week ended Tuesday, and despite losing 26.25¢ on the week ended Friday, most active December futures are still 48¢ above their recent contract low. Key support was at ~$5.70, which was breached Thursday motivating us to reward the rally with a defensive 10% cash sale and a 10% hedge for the 2025/26 crop that we will keep a close eye on. Large specs are now in a territory where they have changed their tune and returned to selling the last three times they covered shorts. Notably below, you can see each of those previous short coverings lead to larger price advances.
