CHICAGO: Although speculators hold bullish views toward Chicago-traded corn and soybeans, soured trade relations between the United States and China have stolen their attention away from additional price-supportive factors, which failed to generate buying last week.
Even a fundamentally bullish supply and demand report from the US Department of Agriculture could not shake the market’s uncertainty over the ongoing US-China trade dispute, which has put agricultural trade between the two countries at great risk.
On May 10, USDA published its initial outlook for 2018/19, calling for US soybean supplies to fall 22 percent on the year. This was a significantly larger cut than expected and soybeans closed higher that day, but the matter faded quickly in the following days as traders set their focus back on the trade issues.
In the week ended May 15, money managers reduced bullish bets in CBOT soybean futures and options to 108,061 contracts from 127,042 in the prior week, according to data from the US Commodity Futures Trading Commission.
This marks speculators’ least optimistic stance on the oilseed since late February, but it contrasts with their bearish year-ago position.
USDA also projected global corn ending stocks to fall 18 percent on the year and US stocks to fall 23 percent in 2018/19. But neither this nor planting delays in the Upper Midwest nor dry weather for Brazil’s winter corn crop prevented funds from selling last week.
Through May 15, money managers reduced their net long position in CBOT corn futures and options to 191,672 contracts from 211,892 in the week before.
Speculators were optimistic to start last week, thinking that China may be willing to lift actions against US agriculture products given President Donald Trump’s pledge to help Chinese Technology company ZTE Corp. But that optimism vanished mid-week as Trump walked back that statement.
Hope was renewed on Friday as trade talks ensued between the two sides, with China “meeting many” of the US demands, according to White House economic adviser Larry Kudlow.
China also walked away from its anti-dumping probe into imports of US sorghum. Beijing imposed hefty deposits that went into effect last month, rerouting many cargoes that had set sail for the East Asian country.
This led to some heavy buying in corn on Friday, and trade estimates indicate that commodity funds were net buyers of the yellow grain over the last three sessions. Shrinking forecasts for Brazil’s heavily exported second-crop corn also added support on Friday.
However, funds were likely net sellers of soybeans over the same time frame, despite the seemingly favorable progress on the trade talks. This news was offset on Friday as USDA announced the cancellation of 949,000 tonnes of US soybeans to an unknown buyer.
Through May 15, speculators cut down on their massive net short position in the CBOT oilshare, which measures soyoil’s share of value in the soy products, though it remains historically bearish.
Money managers reduced their net long in CBOT soybean meal to 121,532 futures and options contracts from 130,385 in the prior week. They also cut their net short in soybean oil to 55,442 contracts from 67,949 a week earlier.
Traders have recently been unwinding long meal/short oil spreads and the oilshare on Friday hit the highest levels in more than three weeks. According to trade sources, commodity funds were net sellers in both products between Wednesday and Friday.
WHEAT GAINING GROUND
USDA’s May 10 reports were not viewed by traders as favorable toward wheat, since the US crop came in slightly larger than expected and global supplies were not seen falling significantly through next year. But the wheat market garnered support again late last week.
Through May 15, money managers switched back to a bearish stance in CBOT wheat futures and options, totaling 5,522 contracts on the net. This compares with the previous week’s modest net long of 4,326 contracts.
They also cut their bullish views in K.C. wheat to 44,190 futures and options contracts from 48,630 in the prior week.
Speculators continue to flip back and forth over Minneapolis wheat, though the positions have been modest. Through May 15, money managers adopted a net short stance of 558 futures and options contracts versus the previous week’s net long of 1,903 contracts.
The wheat contracts rose midweek on short covering following three-week lows reached on Tuesday. Futures continued to climb on Thursday as traders eyed dry-weather production concerns in key exporters Australia and Russia.
Wheat contracts surged on Friday as forecasts showed more dry weather heading for the already-stressed US winter crop. Heavy rainfall in the Northern Plains is also expected to further slow spring wheat plantings in the coming days. CBOT July futures jumped 4.2 percent on Friday, its largest single-day percentage gain since March 1.
Trade estimates suggest that commodity funds are entering the new week back in bull territory on CBOT wheat, particularly after Friday’s heavy buying.
Source: Brecorder
