Funds trim bearish CBOT soybean bets awaiting Brazil rains

Ample global supplies have kept speculators on the short side of the Chicago grain and oilseed markets so far this year, though droughts across many key exporters are now giving bears some pause.

Top soybean exporter Brazil is amid one of its worst-ever droughts, which is slowing the early planting efforts. Weather models have yet to confirm that sufficient relief is coming soon.

In the week ended September 17, money managers trimmed their net short position in CBOT soybean futures and options to a 13-week low of 1,22,415 contracts, down more than 8,000 on the week.

‘Most bearish’ view

This remains funds’ most bearish soy view for the time of year despite being a third lighter than their all-time net short set in July. Speculators have held a net short in CBOT soybeans since the beginning of the year after nearly four years in bullish territory, but they can prolong bearishness, too. From June 2018 through March 2020, money managers were net short 85% of the time.

Most-active CBOT soybeans rose nearly 1% in the week ended September 17. CBOT corn was up 2%, but money managers were slight net sellers of the yellow grain, increasing their net short by less than 3,000 to 1,34,814 futures and options contracts.

That is roughly the same corn stance that investors held a year ago, when corn futures were trading about 19% higher than the current levels near $4 per bushel.

The U.S. Department of Agriculture on September 12 increased its estimate for U.S. corn yield, against expectations for a reduction, and soybean yield was identical to the prior outlook. Both are set to be record large, but dry and warm weather over the last two months could shrink yields.

Dryness issue

Dryness is also a problem across Black Sea wheat regions, hampering planting in Ukraine and Russia. Ukraine’s farm ministry on Friday (September 20, 2024) cut its wheat area forecast, potentially due to the dry conditions.

CBOT wheat futures rose fractionally in the week ended September 17, and money managers cut their net short for a third consecutive week, this time by more than 4,000 contracts to 25,033 futures and options contracts.

That is close to being funds’ least bearish CBOT wheat view in nearly two years. Weather concerns for wheat also persist in other regions including Europe and Argentina, but record Russian exports and the steady, competitive price of Russian wheat have partly offset global supply concerns.

Drought is also a problem in Argentina, where near-record-low river levels are slowing exports. Argentina is the world’s leading supplier of soybean products.

Money managers have held a net long in CBOT soybean meal futures and options for five months, increasing it to a six-week high of 39,758 contracts in the week ended September 17.

But funds hold a heavy net short in CBOT soybean oil, which grew by nearly 3,000 contracts in the latest week to 50,588 futures and options contracts. That is their second-most bearish soyoil view for mid-September behind 2018.

Corn, wheat and soymeal futures lost ground over the last three sessions while beans drifted higher and soy oil notched respectable gains. Traders this week will be watching for U.S. harvest results and monitoring any forecast changes for areas currently in drought. They will also be readying for the USDA’s September 30 quarterly stocks report, which can be a market-mover as results are sometimes unpredictable.

(Views expressed above are of a Reuters columnist)

Published - September 24, 2024 10:36 am IST