Corn: Large Specs reduced their net short position in the week ended Tuesday 7/16, a period in which most active Sep closed 1.75 cents higher. It appears at least for now that specs are done adding to their shorts, and its about time. They have approached their all time net short position from February, and are in a position where we are left asking two questions; 1 – do they have enough dry powder to continue adding to shorts, and 2 – what if anything could spark a short covering rally, and how high can that push the market considering the amount of corn left to be priced by farmers.
We don’t typically get much out of the commercial position, but having spent two weeks at historical net longs, we have to imagine this is the result of farmers refusing to sell bushels. Bushels on DP or basis contract would not cause commercials to short against their physical position.
While funds have stopped selling corn, they have not yet changed their view of the soybean market. This could be due to the ample supply of beans in the U.S., or the outrageous supply of beans globally. Whatever the case, with specs exactly 1,100 contracts shy of their all time record net short, we again are asking the same questions in beans as we are in corn. Do they have dry powder, what could cause a short covering, is there any upside with a short covering event, and with the commercials at record net long, have farmers continued to resist pricing bushels?
We can’t learn much from the Chicago SRW COT Report. Traders for the time have stopped selling and sit at a relatively short position vs. history, and commercials are relatively long vs history, but not in such extremes as corn and beans. It is positive to see short covering and the technical picture looks more constructive, albeit not very decisive, than corn and beans.
